Investment construction loan

It is a construction loan for a property you build to rent out rather than occupy. Money is released in stages as the build progresses and interest applies only to the drawn balance. Lenders assess it under their investment lending policy, which differs from their owner-occupier policy.

Many will count the proposed rent on the finished property, usually supported by a rental assessment from the valuer. It is generally counted at a discount rather than in full. How much of it counts varies by lender, which is why the same project produces different borrowing figures.

The build mechanics are the same, including the progress stages and the drawdown cycle. The assessment differs, because lenders apply investment lending policy and read rental income under their own rules. Deposit expectations and product choice can also differ, subject to lender approval.

Often yes. Equity in the land can contribute towards or cover the deposit on the construction facility, subject to a current valuation and your serviceability. Owners subdividing an existing block and building at the rear do this regularly, and it is one of the more common files we see.

A duplex or a second dwelling can usually sit under a construction facility. Once a project runs to several dwellings, or the intention is to build and sell, lenders generally move it into development finance and assess it on the project rather than mainly on you.

Interest on the drawn balance, which rises with every stage, plus any drawdown or valuation fees the lender charges along the way. There is no rent coming in until the property is finished and let, so plan for the gap between the final drawdown and the first tenant.

That is a question for your accountant, and it turns on your circumstances and on when the property becomes available to rent. We do not give tax advice. What we can give you is exactly what interest was charged and when, so your accountant has accurate figures to work from.