Minimum Deposit for construction loan

How much deposit is required for new home construction loan??

Can we get construction loan with 5% deposit?


  • talk to a broker.

  • You want a broker.

  • Something something broker

  • $176,447

  • As per everyone's comment, talk to a broker or bank, but only difference in construction loan is that money get release by bank in stages.

  • Thanks everyone. Is that make any difference, going to broker or directly to bank?

  • You could also talk directly to the bank, but with 5% deposit? I doubt it!

  • Having gone through this process myself recently I found the answer will vary depending on who you speak to.

    Builder: She'll be right, Mate, it'll work out - 5% will be plenty deposit!
    Bank: You will need XX% deposit and we won't budge.
    Broker: Forget about the deposit, how much do you want to borrow?

    The trap people tend to fall into is they worry what they need for the upfront payment just to get into a home loan, and forget about what comes later. What you really need to do is look beyond that. Look at how much you have right now and do some basic maths: How much can I borrow if this is only 5%? If it's only 10%? …etc & etc. Then, look at the viability of paying back that amount in realistic terms. I think you'd be better off speaking to a financial adviser to help you map out a long-term plan instead. Just my two-bob's worth.

    • Not to be dismissive, but seeking advice from a financial advisor when you are finding a 5% housing deposit an issue is not good advice.
      With sadly few exceptions, financial advisors will provide cookie cutter advice, because the advice you need when you have limited wealth is really very straight forward:
      - trim your expenses.
      - maximise tax advantages of your savings and investments
      - make sure you have suitable insurance
      - consider some longer term investments (I am being generous here because this advice usually boils down to negative gearing property).

      If you are finding 5% mortgage down payment challenging, you aren’t up to to the advice above. Your advice is the same you will get from your Dad:
      - trim your expenses
      - save all you can
      - see if you can pick up some extra earning opportunities

      You don’t have enough finances yet for financial advice.

      • Fair points. Perhaps I chose the wrong words and shouldn't have said 'financial adviser'. Instead, what I meant to convey is to see someone who can help you to better manage your current finances, assist with preparing a realistic budget that's suited to your earnings at this point, and help you to make a plan for future major expenditures (e.g. saving for a house loan).

        • This I can get behind!
          It always surprises me that there are people who don’t like playing with the loan calculations on bank web sites - look how much I can save if i have an extra $2000 deposit! Etc.

          It’s a good idea to find a friend/parent/acquaintance who is familiar with this kind of math/modelling to show you some scenarios.
          I forget this sounds hard, but it really is 30mins or an hour of chatting after you make them dinner and you will get some good ideas of how to organise yourself for success.

  • Thanks Chazzozz. My land is getting titled soon but I only have 5% so trying to figure out if there is a way to get construction loan???

    • As I clumsily tried to point out above you really should be making a good effort to understand where your finances are at right now, even before you begin considering getting a loan for construction. The last thing you want to do is over-commit even before you break ground. There are many things that still aren't clear yet.

      Have you fully paid for the land? If so, you might be able to use the value of it as partial collateral on a building loan. The lender can advise on this.

      Do you already have a plan for the house with a solid quote? If that's the case then shopping around to various brokers and banks may save you some $$ - you'll get lots of different answers and it can be confusing. Ask LOTS of questions - if anything doesn't make perfectly clear sense then ask them to explain. Avoid any hand-waving of concerns they say can be addressed later.

      Who is building your home? I found out the hard way this can make a BIG difference. Because I'm going with a modular home builder the bank insisted I need a 20% deposit, simply because it won't be 100% built on-site. The same would apply to a kit home. The only way I could get the lowest possible deposit would be with a house & land package or go with a full-service builder who constructs everything (or the major portion of it) on the land the home will be situated.

      How old are you? Something else I found out the hard way is your age will also have a big impact on the loan. If you're older than 40yo then you may not be able to get a 25 or 30 year term, which will in turn reduce the amount you can borrow. You will then need to pick up any shortfall yourself, which isn't necessarily increasing your deposit but is still something you'll have to pay extra for out of your own pocket.

      Are you eligible for any grants? The Federal Gov't has just extended the COVID stimulus grant, and some banks & brokers are accepting this as part of your deposit. Same goes for the First Home Buyer's grant. Speak to your local State Revenue Office to see if you can apply for either, then talk to lenders to see if they'll accept it.

      Do you absolutely need to build now? I know it's attractive to sign a contract now to take advantage of the $25K stimulus grant, but if you're barely scraping together 5% do you have the capacity to service a loan later? It may end up costing you more than $25K later on. Can you sit on it for another year or so? If you're lucky, it might even appreciate in value in that time, which will open up your options a bit more: larger equity in your favour or even flip it for a profit.

      I don't want to rain on your parade but spending some time thinking through the hard questions now will save you a lot of grief in the future.

  • Hi Op

    Broker here

    Might be doable with 5% deposit, depends on how much equity in the land.
    Send me a PM and we can see what options you've got.