Construction loan fees catch people off guard because they're structured differently from standard home loans.
When you're building in Pimpama, you're not just dealing with application fees and valuation costs. You're also paying for progress inspections, progressive drawing fees, and often separate charges for council plan reviews. These fees stack up across multiple payments as your build moves from slab to frame to lock-up, and most people don't factor them into their budget until the first drawdown request comes through.
The structure of construction loans means lenders charge fees at each stage of the build, not just at settlement. Understanding what you'll pay upfront and what repeats at every progress payment gives you control over your total cost.
What Construction Loan Fees Actually Cover
Construction loan fees typically include an application fee, a valuation fee for the land and proposed build, and a progressive drawing fee charged each time funds are released to your builder. The progressive drawing fee usually sits between $250 and $400 per drawdown, and most builds involve five to six progress payments.
A valuation for construction finance often costs more than a standard property valuation because the valuer needs to assess both the land and the construction contract. Expect to pay between $400 and $800 depending on the property location and build complexity. In Pimpama, where house and land packages dominate and building contracts tend to follow fixed price structures, valuations typically sit at the lower end of that range.
Some lenders also charge a progress inspection fee, which covers the cost of sending a qualified inspector to verify that the work completed matches the builder's claim for payment. This fee is separate from the progressive drawing fee and can add another $200 to $300 per inspection.
How Progressive Drawing Fees Add Up Across Your Build
Consider a builder in Pimpama working through a standard fixed price building contract with five progress payments: base stage, frame stage, lock-up, fixing stage, and practical completion. If the lender charges $350 per progressive drawing fee, that's $1,750 in fees just for releasing your own money.
If your lender also charges a progress inspection fee at each stage, add another $1,250 to $1,500. Combined, you're looking at close to $3,000 in fees across the build, before factoring in the initial application and valuation costs.
These fees don't appear on the loan contract in the same way as interest charges, so they're often underestimated during budgeting. In our experience, clients building in growth areas like Pimpama are already stretching to cover deposit requirements and don't always account for these recurring charges.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Mi Finance Broker today.
Cost Plus Contracts and Why They Change the Fee Structure
A cost plus contract means the builder charges you for the actual cost of materials and labour, plus a fixed margin. These contracts are less common in Pimpama, where most volume builders offer fixed price building contracts, but they do appear in custom builds or renovations.
Under a cost plus contract, the progress payment schedule becomes less predictable. Instead of five clearly defined stages, you might have eight or ten smaller drawdowns tied to specific trades or materials. That means more progressive drawing fees and more progress inspections.
If you're considering a custom design on suitable land in Pimpama, ask your broker whether the lender caps the number of progress inspections or offers a flat fee structure for builds with more than six drawdowns. Some lenders do, and it can save you several thousand dollars on a build with a more complex payment schedule.
Lenders That Waive or Reduce Construction Loan Fees
Some lenders waive the progressive drawing fee entirely, particularly if you're borrowing above a certain loan amount or consolidating other debts into the construction loan. Others offer a flat fee structure where you pay one upfront charge instead of per-drawdown fees.
As an example, a client building a house and land package in Pimpama with a loan amount above $500,000 secured a lender that charged a single $1,200 construction management fee instead of per-stage fees. Across six progress payments, that saved around $900 compared to a lender charging $350 per drawdown.
Not all lenders advertise these structures, and they're often available only through a broker who has access to construction loan options from banks and lenders across Australia. It's worth comparing at least three lenders before committing to a construction loan application, particularly if your build involves more than five progress payments.
How Interest-Only Repayments Reduce Costs During Construction
During construction, most lenders only charge interest on the amount drawn down, not the full loan amount. This keeps your repayments lower while the build is underway, but it also means your loan balance doesn't reduce.
Switching to interest-only repayment options during the construction phase can help you manage cash flow if you're also paying rent or holding an existing mortgage. Once the build completes and the loan converts to a standard home loan, you switch to principal and interest repayments.
This structure works well for clients in Pimpama who are building while living elsewhere and need to keep costs predictable during the build period. Just make sure you understand when the interest-only period ends and what your repayments will increase to once construction finishes.
What Happens if Your Build Runs Over the Disclosure Date
Most construction loans require you to commence building within a set period from the Disclosure Date, usually six months. If your builder delays or council approval takes longer than expected, you may need to request an extension.
Some lenders charge an extension fee, typically between $150 and $300. Others allow one extension at no cost but charge for subsequent delays. If your development application in Pimpama is still waiting on council plans and you're approaching the six-month mark, contact your broker early to avoid paying unnecessary extension fees.
In areas like Pimpama, where land releases are frequent and infrastructure is still being developed, council approval can occasionally take longer than anticipated. Building this buffer into your timeline reduces the risk of paying avoidable fees.
How to Structure Your Loan to Minimise Fees
Start by selecting a lender that either waives progressive drawing fees or offers a flat fee structure. Then, negotiate with your builder to consolidate progress payments where possible. Instead of six or seven smaller drawdowns, aim for five clear stages aligned with a fixed price building contract.
If you're planning additional payments outside the standard progress payment schedule, such as early payments to secure materials or pay sub-contractors directly, check whether your lender charges extra fees for non-standard drawdowns. Some do, and those fees can add up quickly if you're managing a custom home finance arrangement with multiple trades.
Another option is to roll your construction loan fees into the loan amount rather than paying them upfront. This increases your total borrowing slightly but spreads the cost over the life of the loan. It's a useful approach if you're managing a tight budget during the build phase, but it does mean you'll pay interest on those fees over time.
Call one of our team or book an appointment at a time that works for you. We'll compare lenders, identify fee structures that suit your build, and make sure you're not paying more than you need to. You can book an appointment directly or speak with a mortgage broker in Pimpama who understands the local building market and can connect you with lenders who support construction finance in the area.
Frequently Asked Questions
What is a progressive drawing fee on a construction loan?
A progressive drawing fee is charged by the lender each time they release funds to your builder during construction. It typically ranges from $250 to $400 per drawdown, and most builds involve five to six progress payments, so these fees can add up to $1,500 to $2,400 across the build.
Do all lenders charge fees at every stage of a construction loan?
Not all lenders charge per-stage fees. Some offer a flat fee structure where you pay one upfront construction management fee instead of individual progressive drawing fees. These structures are often available through brokers and can save you hundreds or thousands of dollars depending on the number of drawdowns.
Can I include construction loan fees in my loan amount?
Yes, most lenders allow you to roll construction loan fees into the loan amount rather than paying them upfront. This increases your total borrowing slightly and means you'll pay interest on those fees over the life of the loan, but it helps if you're managing a tight budget during the build phase.
What happens if my builder delays and I go past the construction start date?
If you don't commence building within the set period from the Disclosure Date, usually six months, you may need to request an extension. Some lenders charge an extension fee of $150 to $300, while others allow one extension at no cost. Contact your broker early if delays are likely to avoid unnecessary charges.
Do I pay interest on the full loan amount during construction?
No, during construction most lenders only charge interest on the amount drawn down, not the full loan amount. This keeps your repayments lower while the build is underway. Once construction completes, the loan converts to a standard home loan with principal and interest repayments.
