How the construction loan process works

How much deposit do I need?

At IMB, you will need at least 10% of your property value saved as a home loan deposit – and you will need to factor in costs like stamp duty, conveyancing fees and any other miscellaneous costs like removalists. In general, rates can be more competitive the larger your deposit is against the purchase value. Check out IMB’s home loan rates and packages. Importantly, any loan with a deposit less than 20% of the property value will require Lender's Mortgage Insurance (LMI).

Getting approval for your construction loan

To obtain unconditional approval for your construction loan, in addition to our standard criteria, you will also need to provide a fixed price tender or building contract. This needs to be:

  • Provided by a fully licensed builder and needs to be valid for a minimum of 60 days from the date of the tender or building contract; and
  • If you are not borrowing the full amount of the building tender or contract, we will also need evidence that you have the funds required to complete the construction.

Before building commences

Once your loan is unconditionally approved, before your builder can start you will need to provide us with:

  • A copy of the signed building contract. The amount noted on the building contract needs to be the same as the fixed price tender
  • Stamped council approved plans, and
  • The builder’s all-risk insurance certificate.

Please note, if the amount noted on the building contract is different to the fixed priced tender, your loan application may need to be reassessed. An amendment fee may be payable.

After receiving the signed contract, we will send an “Authority to Commence Construction” letter to you and your builder. This letter allows your builder to commence the construction of your new home.

TIP: You can check validity of the Builder’s Licence details through state government websites online. We recommend that you do this before entering into any building contracts.

Building process and progress payments

If your home loan approval was based on you making your own financial contribution, please note you will need to make this payment first. This needs to be made before we will start releasing any progress payments from your loan. You will also need to provide us with a copy of the receipt for this payment from your builder. If you are a First Home Buyer, please keep in mind that the First Home Owners Grant is only paid once the slab stage is complete.

When construction of your new home has commenced you will receive the first invoice for payment from your builder. Provided that you are satisfied with the work which has been completed, forward a copy of this invoice along with the completed first progress payment request form (signed by you and all other borrowers) through to us via this email address:

Upon receipt of the builder’s invoice and form, we will arrange for a progress inspection by one of our independent valuers. This valuation helps us to ensure that work is progressing in line with your building contract. This inspection can take on average around 5 business days to complete, depending on where your property is located.

Once the valuation is received, we will assess the request and forward payment to your builder as per the payment instructions. If we are unable to make the payment, we will contact you to discuss.

The same process will be followed for all progress payments until your home is complete.

Variations to the building contract

Building contracts can sometimes change as you add, remove or tweak some aspects of the home after construction has commenced; for example, you might decide to upgrade your kitchen. When this happens, you will normally see this additional charge noted on your builder’s invoice. It is important that you have sufficient funds in either your own savings or within your loan amount to cover this extra cost.

Finalising construction

When it comes time to finalise your last progress payment request we will also need:

  • The final invoice
  • Copy of your Home Building Insurance Policy. The minimum replacement value amount needs to match the amount shown in the “Security” section of your Home Loan Contract Schedule, and
  • Copy of Final Occupation/Completion Certificate (Interim certificate may be accepted in certain circumstances).

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Important Information

Important Information

This article has been prepared by IMB Bank and contains general information only. It is not intended to be relied on as advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, financial, taxation or other professional advice before you make any decisions about your business. Consider the relevant Terms and Conditions or Product Disclosure Statement and Target Market Determination available here before deciding whether to acquire any products or services offered by IMB Bank. Lending criteria, terms and conditions, fees and charges apply to IMB loan products.