Managing construction loans

Construction is a feature of our Basic and Offset Home Loan Facilities. It can assist clients who are: 

• building a residential dwelling, either owner-occupied or investment, on existing or new land purchases, or
• making structural renovations (e.g. home improvement or renovation) to an existing dwelling where we need to rely on the 'on completion' value of the property. 

A one-off construction administration fee of $1,500 applies, which includes all valuation inspections and progress payments during the construction period.

1. A dedicated construction loan account where progress payments are made. There can only be one construction loan account in a home loan facility.
2. Interest only variable repayments on the construction loan account for two years. If the construction period ends prior to this, your client can choose to stay on interest only repayments until the end of the initial two-year period or switch to principal and interest repayments.
3. Up to 5 additional loan accounts can be established at settlement with fixed or variable interest rates, and interest only or principal and interest repayment types.
4. Offset accounts are available during the construction period and can be linked to the construction loan account in an Offset Home Loan Facility. Redraw isn’t available on the construction loan account.

• Maximum LVR of 80% - loan amount restrictions apply.
• The maximum allowable construction period is generally 2 years.
• Commencement of the building works must take place within 3 months after the initial settlement date.
• Up to two dwellings are permitted under the construction loan, however, both are required to be on the one building agreement/contract.
• The building agreement/contract must be fixed price or fixed term, industry standard contract and is to be entered into prior to formal loan approval. It also must be signed by all parties and include an acceptable progress payment schedule. The signed building contract is required to be provided before formal approval.
• Council-approved plans and specifications should be provided prior to formal approval. If plans are not yet approved, a copy of the plans which have been or are to be submitted to the council can be provided instead.
• The only acceptable security is a first registered mortgage over the relevant security property.
• The security property must be zoned for residential use and the dwelling to be erected on that security property must comply with all applicable zoning requirements.
• Loans for builders or property developers for speculative investment purposes are not acceptable (e.g. where the principal nature of their business or income generation is reliant on the development and/or future sale of the security property).
• Not available to owner-builders, or for kit demountable homes.

• If your client is seeking funds to purchase or refinance a block of vacant land (or property) along with funds to cover the costs of construction, they can complete this under one loan account.
• To nominate a construction account, the ABS purpose of the account must be one of the following codes:
  • ABS-121: Constructing house by first mortgage
  • ABS-123: Constructing other dwelling by first mortgage 
  • ABS-327: Finance for alteration and additions.
• The construction account must be set to interest only repayments for a minimum of 2 years.
• There needs to be at least one security with a status of “to be built”.
• The total purchase or refinance amount will be disbursed upfront to your client at settlement, and the remaining funds for construction will be progressively drawn down via progress payments.
• All other non-construction accounts in the facility can have their own ABS purpose, rate type and repayment type.
• If there are added progress claims for additional work items on construction loan, see Progress claim for additional work items on a construction loan.

At formal approval, you and your client will receive a construction pack that contains a document guide to be followed for each stage of construction. 

It’s also reissued to your client with the settlement confirmation email which they’ll receive on the day of settlement. We don’t accept construction loans where the owner is also the builder.

The construction commencement letter is issued with the settlement confirmation on the day of settlement via email. A copy of the letter is emailed to you and the borrowers.

Construction must commence within 3 months following the settlement of the loan and be completed within 24 months of the initial settlement of the loan. If there are delays with the commencement, email us to provide an estimate of when work is expected to commence.

Email constructionpayments@macquarie.com with the APP number noted in the email subject line.

To support your client through the stages of construction, we’ve outlined key information on how to manage progress payments, including a progress payment schedule example.

If your client has a FHOG, the funds will be released when the slab stage of construction has been completed.

For more information, please refer to our First home buyers article.

The minimum standard of finish for a construction loan is that the expected finish and fit out is of a professional standard, consistent with and aligned to the approved plans and specifications.

The property is expected to be fully complete in a readily saleable condition upon final loan drawdown. Ancillary items such as driveway, fencing or landscaping may be completed post final drawdown.