Building a new home is financed differently from buying an existing one. Instead of paying the full amount on day one, a construction loan releases money in stages as the build progresses, and you usually only pay interest on what has been drawn.
How a construction loan works
If you’re buying land as well, the land is usually settled first. The building part of the loan is then paid to your builder in stages, often called progress payments or draws. Each stage is checked against your building contract, and the lender may send a valuer to confirm the work has been done.
Common stages are:
- Deposit when the contract is signed
- Base or slab once the foundations are down
- Frame when the walls and roof structure are up
- Lock-up once windows, doors and roof are in
- Fixing for internal fit-out such as cabinets and plaster
- Practical completion when the home is finished and handed over
Your contract sets out the exact stages and amounts. Before each payment you sign an authority for the lender to pay the builder, so it pays to check the work first.
Your protections under WA law
- The Home Building Contracts Act 1991 covers fixed-price contracts between $7,500 and $500,000
- Under the Act, the maximum deposit a builder can ask for before work starts is 6.5% of the contract price
- Progress payments should only be for work already done or materials already supplied
- Building work that needs a permit and is worth more than $20,000 needs home indemnity insurance, and it must be in place before you pay your builder
Interest during the build
During construction, many lenders charge interest only on the amount drawn so far. That keeps early repayments low, but they rise as each stage is paid. If you’re also paying rent, build both into your budget so the last few months aren’t a squeeze.
Costs people forget
- Variations to the contract, which are often paid in cash before the final stage
- Site costs such as retaining, soil classification and connections
- Driveways, fencing, landscaping and window treatments
- Stamp duty on the land (first home buyers may pay less or none)
- Holding costs such as rent during the build
Grants for new homes
First home buyers building a new home in WA may be eligible for the $10,000 First Home Owner Grant, where the total value of land and home is under $800,000 south of the 26th parallel. See our first home buyer guide for the full rules.
General information only, written on 11 October 2026. It doesn't take your personal circumstances into account. Rates, grants, tax rules and concessions change, so speak with us before making a decision.
