Everything You Need to Know About House and Land Packages

What Makes Construction Finance Different From a Standard Home Loan

Construction finance releases funds in stages as your home gets built, rather than providing the full loan amount upfront. Lenders only charge interest on the amount drawn down at each stage, which means your repayments start lower and increase as construction progresses. This structure protects both you and the lender, because funds are released only after a progress inspection confirms each phase is complete.

When you purchase a house and land package in WA, you're typically dealing with a fixed price building contract from a registered builder. The land settles first, which means you'll need finance approval that covers both the land purchase and the construction phase. Your lender will require council approval and a copy of the building contract before they'll issue formal approval for the construction component.

Consider a buyer purchasing in Dunsborough who has found suitable land and chosen a project home design. The land settles within 60 days, and the builder requires a construction period of around six months. The lender structures the loan so the land component settles first, then construction funding is released according to a progressive payment schedule tied to building stages like base, frame, lock-up, fixing, and practical completion. The buyer pays interest only on what's been drawn, so in the first few months they're only servicing the land cost plus the initial building stage.

How the Progressive Drawdown Works With Fixed Price Contracts

Most house and land packages in WA use fixed price building contracts, which means your builder quotes a set amount and takes responsibility for delivering the home at that price. The contract will outline a progress payment schedule, usually five or six stages, and your lender releases funds after each stage is inspected and signed off by a qualified building inspector.

The lender will charge a Progressive Drawing Fee each time funds are released. This fee typically ranges from around $200 to $400 per drawdown, and it covers the cost of arranging the inspection and processing the payment. Some lenders cap the total number of progress payments, while others allow unlimited draws if you're doing a custom design or owner builder project.

You'll also need to commence building within a set period from the Disclosure Date, which is usually specified in your loan approval. Most lenders require construction to start within six months and finish within 12 months, though extensions can be arranged if there are delays with council plans or materials.

What Happens If You're Using a Cost Plus Contract Instead

A cost plus contract is less common with house and land packages but can apply if you're doing a custom home design or working with a builder who charges their actual costs plus a margin. Under this structure, you'll need to provide detailed quotes from sub-contractors like plumbers and electricians before the lender will approve each progress payment. This adds more administration on your side, but it can offer more control over the build if you're making changes as you go.

Lenders treat cost plus contracts as higher risk because the final loan amount isn't locked in from the start. You'll usually need a larger deposit and may face a slightly higher construction loan interest rate compared to a fixed price building contract. If you're considering this option, it's worth comparing whether the flexibility is worth the additional cost and documentation.

In our experience, most buyers in the South West who are purchasing a house and land package stick with fixed price contracts because it removes the uncertainty around final costs and makes the construction loan application more straightforward.

Interest-Only Repayment Options During the Build

During construction, most lenders offer interest-only repayment options, which means you're only paying the interest charged on the amount drawn down so far. Once construction reaches practical completion and you've moved in, the loan converts to a standard home loan with principal and interest repayments, often called a construction to permanent loan.

Some buyers choose to make additional payments during the construction phase to reduce the balance before they move in, which can lower the total interest paid over the life of the loan. Others prefer to keep their repayments as low as possible during the build and redirect cash toward furniture, landscaping, or other setup costs once they're in the new home.

The interest rate during construction is usually variable, though some lenders allow you to lock in a fixed rate once the loan converts to principal and interest. If rates are trending up, it can make sense to lock in a portion of your loan amount once construction is complete.

Council Approval and Development Application Timelines in WA

Before construction funding can be released, your builder needs council approval for the development application. In regional areas like the South West, this process can take anywhere from a few weeks to a couple of months depending on the shire and whether the design meets local planning requirements. Your builder will usually manage this on your behalf, but delays can push out the construction start date and affect your loan approval timeline.

If you're purchasing off the plan or buying into a new estate, the developer may have already secured planning approval for the house designs they offer, which speeds up the process. Always check with your builder about expected timeframes before you lock in your finance, because most lenders require construction to commence building within a set period from the Disclosure Date.

How Dunn Bay Home Loans Helps You Access Construction Loan Options From Banks and Lenders Across Australia

We work with a panel of lenders who offer construction finance to WA buyers, and we'll compare their progress payment schedules, Progressive Drawing Fees, and interest rate structures to find the option that suits your build. Some lenders are more flexible with timelines if your builder runs into delays, while others offer lower fees but stricter conditions around inspections and drawdowns.

If you're also considering renovating an existing property or looking at investment property construction, we can structure your loan to handle multiple stages or projects. Many buyers who start with a land and build loan come back to us later for refinancing once their home is complete and they want to reassess their rate or access equity for improvements.

Call one of our team or book an appointment at a time that works for you, and we'll walk through your build timeline, deposit position, and lender options so you know exactly what to expect before you sign your building contract.

Frequently Asked Questions