Owner-Builder vs. Builder-Owner

• An owner-builder owns the property and manages the construction project themselves.
• A builder-owner is a licensed builder who owns the property they are constructing.

Construction Loan

• Provides financial flexibility to build a home with funds released in stages.
• Interest is only paid on the amount used.

Steps of Construction

• Clearing of the site
• Slab or base stage
• Frame stage
• Lockup stage
• Fit-out or fixing stage
• Practical completion stage

Tips for Getting Your Construction Loan Approved

• Ask your bank to pay your builder directly.
• Ensure each stage is complete before completing drawdown requests.
• Accept the reality and set your expectations.
• Do not make changes to the building contract.
• Include other minor and additional work quotes.
• Apply for a cost plus/variable cost construction loan.

Do I Need a Building Certificate and Development Approval?

• Council approval is required before construction begins.
• For owner-builders, apply for Development Approval (DA) with the local council.

How Can I Be Sure I Don’t Need a Development Approval?

• Search the planning rules for your property.
• Speak to a duty planner.
• Get more info at a pre-lodgement meeting.

For residential building works

• Alterations and additions to existing dwellings (less than 3 storeys)
• Single new dwellings (less than 3 storeys)
• Dual occupancy dwellings
• Granny flats
• Garages and carports
• Ancillary outbuildings
• Developments that include a block of units, apartments or villas require a ‘multiple dwelling’ to be submitted.

For commercial building works

• Commercial office fit-outs
• Commercial shopfront renovations
• Signage and advertising structures
• If building work is required for the opening of a small bar, pub, club, cafe, restaurant or takeaway shop
• The removal or pruning of trees above 5m in height, a canopy spread over 5m or a trunk diameter of more than 300mm, at ground level

Who Should I Have on My Team?

• Draftsman/engineer: $5,000 to $15,000 or a percentage of projected construction costs (6-12%).
• Town planner: $3,000-$4,000
• Hydraulics engineer: They provide a flood study if required with quotes ranging from $2,000-$5,000
• Stormwater engineer: They can provide drainage and stormwater solutions with quotes ranging from $3,000-$7,000
• Geotechnical engineer: $4,000-$5,000
• Surveyor: $3,000-$10,000

How Does the DA Application Process Work?

• Complete DA application: Fill out the form on the council website, be detailed, and submit it to the council’s customer service desk.
• After submission: You will be assigned a DA number, and some applications may be on exhibition for public comment.
• Site inspections: Inspections will be conducted throughout the DA approval process.
• Obtain a construction certificate: Required before starting building.
• Apply for an appeal: If rejected, you can appeal the decision with your state’s equivalent court.

What Do I Need to Include with My DA?

• Owners’ consent: Get consent from all registered owners of the property.
• Details of the development: Provide a site plan showing the location, elevations, and sections of the development.
• Statement of Environmental Effects (SEE): Detail any expected impact of the development on the environment, adjoining premises, or the public.
• Additional information: May include heritage impact statement, floor area details, demolition photographs, Electricity Act Declaration Form, flood study, bushfire study, and geotechnical report.

Construction Loan Document Checklist

• Required before construction: standard loan documents, signed building contract, Quantity Surveyor Report, council-approved plans, evidence of builder’s insurance, quotes for additional work, First Home Owners Grant (if applicable).
• Required during construction: signed progress payment invoices, receipts for any out-of-contract invoices.
• Required after construction is complete: final signed progress payment invoice, certificate of final inspections, certificate of occupancy.

Tips for Construction Loan Approval

• Signed Building Contract: Ensure the finalised building contract is signed and dated by both you and the builder.
• Quantity Surveyor Report: Required for projects valued over $1 million. Include this report in the contract if needed.
• Council-Approved Plans: Obtain council approval early, as it can take 42-100 days depending on your state and council.
• Evidence of Builder’s Insurance: Ensure the builder has Public Liability Insurance and Home Building Compensation (formerly Home Warranty Insurance).

Additional Recommendations

• Finance Clause: Do not sign a building contract unless it includes a finance clause allowing at least 3 weeks to organise your construction loan. If not included, request one or provide a draft contract to the bank.
• Tender-Based Loan Approval: Some banks approve loans based on a tender, which is an unofficial document outlining building costs and the final product. Get pre-approval first if you only have a tender.
• Building Plans: Plans do not need to be council-approved initially but should give the valuer an idea of the property.
• Building Specifications: Provide details on the quality of materials, appliances, and workmanship to impact the final valuation and borrowing power.
• Quotes for Additional Works: Include quotes for additional works such as swimming pools, sheds, landscaping, power poles, and driveways. These works do not need council approval but may require funding.

Important Considerations

• Upfront Quotes: Provide quotes for additional works upfront to borrow for these costs. Some lenders release funds for additional work only after the main house is completed.
• Switching Lenders: Be prepared to switch lenders if the construction schedule does not align with the lender’s fund release policy.

My Construction Loan is Approved – How Much Do I Pay at Each Stage?

• Construction must start within six months and be completed within 24 months.
• An upfront deposit is usually required to cover initial material costs, typically around 5% of total building costs.
• The building contract should detail the progress payment schedule, aligning with the completion of each stage.
• At the end of each stage, you will receive an invoice from your builder, known as a “progress claim.”
• Sign the tax invoice and give it to the bank to authorize the next drawdown for your construction loan.
• The amount paid at each progress payment stage is based on a percentage of the total costs of completion:
  • The deposit: 5%
  • The slab or base stage: 15%
  • Frame stage: 20%
  • Lockup stage: 20%
  • Fit-out or fixing stage: 30%
  • Practical completion stage: 10%
• In the Northern Territory, the stages are slightly different:
  • The deposit: No more than 5%
  • The slab or base stage: 10%
  • Frame stage: 20%
  • Enclosed stage: 25%
  • Fixing stage: 30%
  • Practical completion stage: 7%
  • Final completion: 3%

Property Selling Costs

• Agent Fees
• Marketing Costs
• Conveyancing Fees
• Capital Gains Tax (CGT)
• Presale Repairs and Renovations
• Styling/ Home Staging
• Auctioneer’s Fees
• Lender Fees
• Moving Costs

Property Purchasing Costs

• Minimum of 5% deposit
• Stamp duty
• Property title transfer fee
• Registration fees
• Conveyancing fees
• Inspections including building/strata and pest
• Home loan set up fees
• Lenders Mortgage Insurance (LMI)