How does finance work when building a new home

Financing a new build uses a construction loan, which differs from a standard mortgage. Funds are released in stages via a progressive drawdown as milestones are met, with interest-only repayments common during the build.

It's vital to have a contingency fund of at least 15% for cost overruns and have a lawyer review your building contract. Carefully vetting your builder and arranging contract works insurance before starting are also essential steps to protect your investment and manage risk.