Building a Home in WA: The Complete Guide to Construction Loans

A construction loan is not the same product as a standard home loan, even though most people assume it is until they're partway through the process. Instead of receiving one lump sum at settlement, the bank releases money in stages as the build progresses, and you're assessed and charged interest differently along the way. Understanding this up front makes the whole build far less stressful.

How a construction loan differs from a standard home loan

With a standard purchase, the full loan amount is drawn down at settlement and you start paying principal and interest (or interest only) from day one on the full balance.

With a construction loan, the lender approves the total amount but only releases funds in instalments as your builder completes and invoices each stage. You're generally charged interest only on the amount actually drawn, which keeps repayments lower while the property isn't yet liveable — but it also means your repayments increase step by step as the build progresses, not all at once at the end.

The typical progress payment stages in WA

Most WA homes are built in double brick (or brick veneer), which shapes how the standard progress payment schedule is broken up — it's a different stage sequence to the timber-frame "frame/lock-up" schedules you'll see referenced in other states. A typical fixed-price WA building contract splits payments across six stages:

• Deposit — paid to secure the contract, generally before the loan is drawn at all

• Slab Down — site works, footings and the concrete slab complete

• Plate High — brickwork (structural walls) built up to roof height, ready for the roof structure

• Roof Cover — roof trusses/frame and roof covering (tiles or sheeting) complete

• Lock Up — external doors and windows fitted, so the home can be secured

• Practical Completion — final fix, cleaning and handover, ready for occupancy

As a real example, a WA fixed-price contract might split a $436,569 contract price (inc. GST) as: a $5,000 deposit, Slab Down 15%, Plate High (often listed on the contract as "Structural Walls") 25%, Roof Cover 20%, Lock Up 20%, and Practical Completion 20%. The exact percentages and stage names vary by builder and contract — always check clause 6 (contract price) and clause 7 (deposit and progress payments) of your specific contract rather than assuming a standard split.

Land and construction: one loan or two?

If you're buying a house-and-land package, some lenders can combine the land settlement and the construction facility into a single approval. If you already own the land, or you're buying land separately, the land purchase settles as a normal loan first and the construction facility sits alongside it, or is added once the building contract is signed.

Either way, the lender wants to see a signed, fixed-price contract with a licensed, registered builder before construction funds are approved — not just a land contract and a vague building intention.

Who actually checks the work before each payment?

This is a common misconception: the bank does not send a valuer or inspector out to check every stage before releasing funds. For most stage payments, the bank relies on you, the client, signing and returning a progress payment form confirming you're satisfied the work being invoiced for has actually been done. That signature is what authorises the drawdown — not an independent bank inspection.

The one exception is prior to the practical completion payment, when the lender typically arranges a single inspection. Even then, it's a rudimentary check — largely confirming the build matches the approved plans (right number of rooms, that sort of thing) — not a quality inspection of workmanship. It's nowhere near as thorough as the inspection you or an independent building inspector would do.

In practice, this means the responsibility for checking each stage is actually complete and built correctly before you sign off sits with you, not the bank. Many owners engage an independent building inspector at each stage (or at least at key stages like slab down, plate high and lock up) precisely because the bank isn't doing that job on your behalf.

Fixed-price contracts, provisional sums and cost blowouts

A fixed-price contract fixes most costs, but items like site works, rock removal, or fittings marked as "provisional sums" (PC items) are estimates, not guarantees. If site costs come in higher once excavation starts, or you change a selection partway through, that's a contract variation — and variations need to be funded.

This is the area that catches people out most. If the loan was approved based on the original contract price and a variation pushes the total cost up, you may need to fund the difference yourself, or go back to the lender for an increase (which isn't guaranteed, and depends on your servicing and the updated valuation). Building in a contingency buffer before you sign is far cheaper than discovering a shortfall mid-build.

Servicing a construction loan

Because interest is only charged on funds drawn, repayments early in the build are low and increase as more of the loan is released. It's worth budgeting as though you're already paying interest on the full loan amount from the start, rather than being caught out as repayments climb. If you're renting while you build, that means covering rent and rising loan repayments at the same time for several months — factor this into your cash flow before you commit.

The First Home Owner Grant and new builds

New and substantially renovated homes in WA can be eligible for the First Home Owner Grant, subject to eligibility criteria and value caps that are reviewed periodically by the WA government. Because thresholds and criteria do change, it's worth confirming current eligibility at application stage rather than relying on what applied when you first started researching.

Choosing a lender for a construction loan

Not every lender is equally comfortable with construction lending, and policies vary meaningfully: how quickly they review contracts, whether they'll fund owner-builder arrangements, and how they treat provisional sums all differ. Matching the loan to a lender that actually handles construction well — rather than the first rate you see advertised — avoids delays once the build is underway.

How I work with clients who are building

I only take on construction loan clients who come to me directly — I don't accept referral arrangements from builders. That keeps the loan advice independent of who's building the house, which matters more in construction lending than almost anywhere else, because the contract terms and the loan structure need to genuinely suit you, not the builder's sales process.

Planning to build? Get in touch before you sign a building contract — a quick pre-check can save you a lot of stress later.

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General information only — it does not take into account your personal objectives, financial situation or needs, and is not tax or legal advice. Consider your own circumstances and, where appropriate, seek advice from a qualified professional before acting.

Ian Freeman — Ian Freeman Finance / Finance365. Credit Representative Number 439731, authorised under Finsure Finance & Insurance Pty Ltd, Australian Credit Licence 384704.