Construction Construction

A first home buyer's guide to construction loans in Perth:

For first home buyers in Perth, building a new home can be a smart and cost-effective way to step onto the property ladder. With more affordable land compared to other major cities, Perth presents a compelling opportunity for buyers seeking to build their first home.

However, construction finance works differently from a standard home loan. Instead of receiving the full loan amount upfront, a construction loan is drawn down in stages, meaning funds are released as each phase of the build is completed. You’ll generally only pay interest on the funds that have been drawn, helping manage costs while your home is under construction.

Navigating the property landscape in Perth can be complex, from understanding local regulations to keeping up with market shifts, but with the right guidance, building your first home here is well within reach.

Understanding Construction Loans for First Home Buyers in Perth

Construction loans are tailored to the staged process of building a home, with funds released gradually as each phase is completed. This approach offers better financial control and aligns payments with actual progress, reducing risk for both you and the lender.

During the build, you typically make interest-only repayments based on the amount drawn down. Most lenders also require a signed, fixed-price building contract before approval, offering cost certainty and protecting against budget blowouts.

How Construction Loans Work

Here’s a breakdown of the typical construction stages and how payments are made:

1. Slab Down: The first progress payment is made after the site is cleared and the concrete slab (foundation) is poured. This stage establishes the structural base of your home and typically accounts for around 15-20% of the total construction cost.

2. Frame Up: Once the slab has cured, your builder erects the frame of the house, including walls, roof trusses, and window frames. This is a major structural milestone, usually representing another 15-20% of the cost. Your lender releases the second payment after inspecting that this phase is complete.

3. Lock-Up: External doors and windows are installed, allowing the building to be physically “locked up”. At this point, the house is secure from the elements. This stage often accounts for 20-25% of the build cost and signals the transition to interior works.

4. Fixing: Internal fittings and finishes such as plastering, kitchen cabinets, tiling, skirting boards, electrical outlets and plumbing fixtures are installed. This stage may involve several trades working simultaneously and generally represents about 20% of the cost.

5. Completion: Final touches are added, including painting, flooring and cleaning. Once the home passes its final inspection and is deemed fit for occupancy, your lender releases the last progress payment. This stage typically covers the remaining 10-15% of the total cost.

Eligibility Criteria for First Home Buyers

To qualify for a construction loan in Perth, you’ll need a steady income, good credit history and a deposit, usually at least 5%. Remember to account for other upfront costs like stamp duty, legal fees and lender charges.

Many Western Australian buyers choose house and land packages, combining the land and build into one contract. This simplifies the process, speeds up loan approvals and offers cost clarity.

Government Grants and Schemes for First Home Buyers in WA

1. First Home Owner Grant (FHOG) WA: The First Home Owner Grant (FHOG) is a one-off payment of $10,000 designed to help first home buyers build a new home in WA. To qualify, the home must be brand new and valued at $750,000 or less if located south of the 26th parallel. In northern parts of the state, the cap increases to $1 million.

2. Stamp Duty Concessions in WA: Stamp duty is a government tax you pay when purchasing property or land. For first home buyers in WA, there are significant stamp duty concessions available. First home buyers in WA now pay no stamp duty on vacant land valued up to $350,000. For land between $350,001 and $450,000, a concessional rate of $15.39 per $100 over $350,000 applies. No concession is available above $450,000.

3. First Home Guarantee (FHBG): The FHBG is a federal scheme that allows eligible buyers to buy or build a home with a 5% deposit and no Lender’s Mortgage Insurance (LMI). You must earn under $125,000 (single) or $200,000 (couple) and plan to live in the home.

The Construction Loan Process: Step-by-Step

1. Finding a Broker: A local broker can guide you through the process and maximise support options.

2. Pre-approval: This is a lender’s indication of how much you may be able to borrow based on your financial situation. It helps set a clear budget and shows sellers you're a serious buyer. Use our calculator to estimate your borrowing power.

3. Choosing a Builder and Land: Work with trusted builders offering fixed-price contracts.

4. Loan Application and Approval: Submit income documents, ID and a building contract.

5. Construction Stages and Payments: Your loan is paid out in stages that align with key phases of the build, including slab down, frame up, lock-up, fixing and completion. After each stage is finished and inspected, your lender releases the next portion of funds directly to the builder. This staggered payment system ensures you only pay for completed work and helps keep the project on track financially.

6. Final Inspection and Settlement: Your lender conducts a final valuation before the last payment.

Key Considerations for First Home Buyers Building in Perth

Building your first home is a major milestone, but it also comes with unexpected costs and complex decisions. From budgeting for extras like landscaping and window coverings to navigating delays due to weather or approvals, it’s easy to feel overwhelmed.

That’s where Loan Market Bal and Associates come in. As local mortgage experts, we provide tailored loan solutions for buying land, building a new home, purchasing off-the-plan or securing a house and land package. We’ll guide you through each stage of the construction loan process – structuring your loan to suit your build, managing progress payments and ensuring your finance stays on track from slab to settlement.

We understand Perth’s property landscape and construction finance requirements, so we can guide you through every stage of the loan process. With our support, you’ll be better prepared, better informed and ready to build your first home on solid financial ground.

FAQs About Construction Loans in Perth

What deposit do I need?

Most lenders require a minimum 5% deposit for a construction loan, but if your deposit is less than 20% of the total loan amount (land plus build), lender’s mortgage insurance (LMI) may apply. However, if you qualify for the federal First Home Guarantee (FHBG), you may be able to build a new home with just a 5% deposit and avoid paying LMI, provided you meet the scheme’s eligibility criteria.

Can I get a loan as an owner-builder?

Yes, it’s possible to get a construction loan as an owner-builder, but it’s significantly more challenging. Most lenders view owner-builder projects as higher risk, so the lending criteria are stricter. You’ll usually need a larger deposit (often 20-30%), a detailed building plan, costings and formal council-approved plans. Some lenders may also require proof of building experience or a builder’s licence. Additionally, fewer lenders offer owner-builder loans, which can limit your options and potentially increase borrowing costs.

How long does approval take?

Around 2-3 weeks, depending on the lender.

Does the FHOG count toward my deposit?

Yes, most lenders accept it.

What are typical interest rates?

Rates start around 6% p.a. Comparison rates may be higher.

Is it harder than a regular home loan?

There are more steps, but a good broker can simplify the process.

Conclusion: Your Perth Home Building Journey Starts Here

Building your first home in Perth can be incredibly rewarding, but navigating construction finance can feel overwhelming. That’s where we come in. Our expert brokers can help you navigate construction loans and unlock available grants. Get in contact today to discuss your options and get your building journey started.

External Sources:

WA Government – First Home Owner Grant (FHOG) WA   

WA Government – Changes to the First Home Owner Rate of Duty

WA Government – Duties Fact Sheet: First Home Owner Rate

Housing Australia – First Home Guarantee (FHBG)

Housing Australia – Home Guarantee Scheme: Help to Buy

  1. Loan Market Bal & Associates – About Us

Loan Market Bal & Associates – Contact Page

Loan Market Bal & Associates – Construction Loans

Loan Market – Borrowing Power Calculator

  1. Loan Market - Compare home loan rates
  2. Loan Market Bal & Associates – Home Loan Pre-Approval

Published: 18/7/2025
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