Construction loans are structured to match your building progress:

- Interest-only payments, typically for one to two years

- Funds released in stages aligned with construction milestones (e.g., base, frame, lock-up)

- You only pay interest on the amount drawn down, helping manage cash flow

- Regular valuations ensure the project is progressing as planned

While both fund building projects, they have key differences:

Construction loans:

- Rely on your ability to service the loan long-term

- Interest is paid monthly

- Suited for individual home builds or small-scale projects

Development finance

- Interest is often capitalised into the loan

- Requires a clear exit strategy, usually selling the property

- Typically used for more significant, multi-unit developments

- May require pre-sales or other risk mitigation strategies

Construction loans are tailored for building projects:

Average home loan

- 30-year term, typically principal and interest repayments

- Full funds available at settlement

Construction loan

- 1-2 year interest-only period during construction

- Funds released in stages as construction progresses

- Converts to a standard home loan after build completion

While both contract types can be financed, there are considerations:

Fixed-price contracts

- Preferred by most banks

- Provides cost certainty

- May have less flexibility for changes during construction

Cost-plus contracts

- Offer more flexibility for project changes

- May require more considerable contingency funds

- Some lenders may be more hesitant or require additional security

BLOX can help you navigate these options and find the best solution for your project and financial situation.