Your deposit sits there earning nothing while you wait six months for a builder to finish your home.
That's what happens with a standard home loan on a house and land package. With construction finance, you only pay interest on what's actually been drawn down. If $150,000 has been released to your builder across two progress payments, you're paying interest on $150,000, not the full $550,000 loan amount. Over a typical six-month build in Cecil Hills, that difference adds up to several thousand dollars.
Why House and Land Packages Need Different Finance
A house and land package involves two separate contracts: one for the land purchase and another for the construction. Your lender releases funds in stages as the build progresses, not as a lump sum at settlement. This is called a progressive drawdown, and it requires a construction to permanent loan structure rather than a standard home loan.
The land component settles first. You'll need to cover stamp duty and any deposit shortfall at that point. Then construction begins, and your lender releases funds according to a progress payment schedule tied to specific milestones like base stage, frame stage, lock-up, and completion. Most lenders work with five stages, though some use six depending on the builder's contract.
What Cecil Hills Buyers Pay During Construction
During the construction phase, you're making interest-only repayments on whatever amount has been drawn down. Consider a buyer purchasing a $650,000 house and land package in Cecil Hills with a 10% deposit. They settle on the land for $250,000, meaning $225,000 is drawn from their construction loan after the deposit. For the first month or two, they're paying interest on that $225,000 while the builder prepares the site and lays the base.
Once the base stage is complete and inspected, the lender releases the next progress payment, perhaps $80,000. Now the buyer is paying interest on $305,000. This continues through frame, lock-up, fixing, and completion stages. Only at practical completion does the full loan amount get drawn down, and the loan converts to principal and interest repayments.
Most lenders also charge a Progressive Drawing Fee, typically between $200 and $400 per drawdown. With five stages, that's $1,000 to $2,000 in fees across the build. Some lenders waive this fee, so it's worth comparing.
How the Progress Payment Schedule Actually Works
Your builder will have a fixed price building contract that specifies exactly when they get paid and how much. This isn't negotiable, it's set by the contract. Your lender needs to align their drawdown schedule with the builder's progress payment schedule.
In our experience, mismatches between what the builder expects and what the lender releases cause the most frustration. Your builder might expect 20% at base stage, but your lender might only release 15% at that milestone. Someone needs to cover that gap, and it's usually you. Reading both the building contract and the lender's construction loan application documents carefully avoids surprises.
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The builder won't start construction until they receive council approval and all required documentation is finalised. For first home buyers in Cecil Hills building on suitable land near the new town centre precinct or around Elizabeth Drive, council plans can take anywhere from six to twelve weeks depending on the complexity of the development application. Some house and land packages come with council approval already in place, which speeds things up considerably.
What Happens If You're Also an Owner Builder
Owner builder finance works differently because you're managing the build yourself rather than contracting a registered builder. Lenders view this as higher risk, so fewer options are available and interest rates tend to be higher. You'll need to demonstrate building experience or qualifications, and the lender will scrutinise the cost plus contract with your sub-contractors more closely.
You're responsible for coordinating progress inspections, paying plumbers and electricians on time, and ensuring each stage meets council requirements before the lender releases the next drawdown. If an inspection fails, the drawdown stops until the issue is rectified. For most buyers purchasing a house and land package in Cecil Hills, using a registered builder under a fixed price contract removes that risk and gives access to better construction loan interest rates.
The Timeline From Application to Moving In
Most lenders require construction to commence within a set period from the Disclosure Date, usually six to twelve months. If the build doesn't start within that window, you may need to reapply or extend the approval, which can mean re-assessing your borrowing capacity and potentially a new interest rate.
Once construction begins, typical builds in Cecil Hills take five to seven months depending on weather, labour availability, and the builder's workload. Your loan remains interest-only during this period. At practical completion, a final inspection is done, the lender releases the last instalment, and your loan converts to principal and interest repayments. This conversion happens automatically, you don't need to do anything.
If you're also looking at refinancing an existing property to fund the deposit on your house and land package, timing matters. You want that refinance settled and funds available before the land settlement date, otherwise you'll need a backup like a bridging loan or additional cash savings.
Choosing Between Construction Loan Options
You can access construction loan options from banks and lenders across Australia, and the differences aren't always obvious. Some lenders offer lower headline rates but charge higher drawing fees. Others have stricter requirements around the builder's credentials or the type of land you're building on. In Cecil Hills, where much of the available land is part of larger residential releases near the intersection of Elizabeth Drive and The Northern Road, most major lenders are comfortable with the location and established builders in the area.
What matters more is how the lender handles variations. If you decide mid-build to upgrade fixtures or change the floor plan, that's a variation. Some lenders allow minor variations without reassessing the entire loan. Others require a full reapplication, which delays the build and costs you interest while you wait. Ask this question before you commit, especially if you're considering custom design elements beyond the standard inclusions.
Call one of our team or book an appointment at a time that works for you. We'll walk through the numbers on your specific house and land package, compare construction funding options that suit your deposit and income situation, and make sure the progress payment finance aligns with what your builder actually needs.
Frequently Asked Questions
Do I pay interest on the full loan amount during construction?
No, you only pay interest on the amount that has been drawn down so far. If $200,000 has been released to your builder, you're paying interest on $200,000, not the full loan amount. This saves you thousands compared to a standard loan structure.
How long does it take to build a house and land package in Cecil Hills?
Most builds in Cecil Hills take five to seven months once construction begins. Council approval can add another six to twelve weeks before the build starts, depending on whether your package already has approval in place.
What fees do lenders charge for construction loans?
Most lenders charge a Progressive Drawing Fee of $200 to $400 each time they release funds to your builder. With five drawdown stages, expect $1,000 to $2,000 in total drawing fees, though some lenders waive this charge.
Can I use construction finance if I'm an owner builder?
Yes, but fewer lenders offer owner builder finance and the interest rates are usually higher. You'll need to demonstrate building experience or qualifications, and the lender will closely review your cost plus contract with sub-contractors.
What happens if construction doesn't start within the lender's timeframe?
Most lenders require construction to commence within six to twelve months from the Disclosure Date. If it doesn't, you may need to extend your approval or reapply, which could mean reassessing your income and potentially a different interest rate.
