In short: During a build you pay interest only on the money drawn so far, not the full loan. This calculator applies the standard Victorian progress schedule of 5% deposit, 10% base, 15% frame, 35% lock-up, 25% fixing and 10% completion, adds the land loan, and totals the interest. On a $350,000 lot with a $420,000 build at 6.50% p.a., a nine-month build costs about $30,000 in interest.
- Average monthly interest during build$2,675
- Rent paid during build$19,800
- Total holding cost until you move in$43,875
- Full loan at completion$700,000
- P&I repayment after completion (30 yrs)$4,379 / month
Uses the standard Victorian progress payment schedule (5/10/15/35/25/10%). Interest is charged only on funds drawn.
Interest-only paid during the build: $24,075
That is a general estimate on standard assumptions. Every lender applies its own expense benchmarks, income shading and policy, so the real figure moves from lender to lender. Gorakh spent years as a senior credit officer deciding exactly these questions. Send him the numbers above and he will tell you what is realistic and which lenders fit — at no cost to you for home loans.
- A former senior credit officer reads itGorakh assessed loan applications on the lender side before he became a broker.
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The repayment changes every time the builder invoices. This tool shows the balance and interest at each stage so you can budget for the build months, and for rent if you are not yet living in the new home.
How this calculator works
Enter the land price, the fixed-price build contract, your deposit, the interest rate and the expected months between stages. The calculator draws each progress payment on its stage date, charges interest only on the balance outstanding, totals the interest across the build, and shows the principal-and-interest repayment once the loan converts at completion.
The Victorian progress-payment schedule
The Domestic Building Contracts Act sets the maximum a builder can claim at each stage of a standard fixed-price home contract in Victoria:
| Stage | Share of build price | What is complete |
|---|---|---|
| Deposit | 5% | Contract signed, before work starts |
| Base | 10% | Footings and slab |
| Frame | 15% | Frame erected and approved |
| Lock-up | 35% | External walls, roof, windows and doors |
| Fixing | 25% | Internal cladding, cabinets, plumbing and electrical fitted |
| Completion | 10% | Handover, occupancy permit issued |
Your lender pays each invoice directly to the builder after an inspection or valuer sign-off. Our guide on construction loan progress payments walks through the paperwork at each stage.
Worked example: house and land in Kalkallo
A couple buy a $350,000 titled lot in Kalkallo and sign a $420,000 fixed-price contract with a volume builder. They borrow the full $770,000 for simplicity, at 6.50% p.a. for illustration, with interest-only repayments during the build. Land settles in month 0 and the build runs nine months.
| Month | Stage drawn | Amount drawn | Balance | Monthly interest |
|---|---|---|---|---|
| 0 | Land settlement | $350,000 | $350,000 | $1,896 |
| 1 | Deposit 5% | $21,000 | $371,000 | $2,010 |
| 2 | Base 10% | $42,000 | $413,000 | $2,237 |
| 3 | Frame 15% | $63,000 | $476,000 | $2,578 |
| 5 | Lock-up 35% | $147,000 | $623,000 | $3,375 |
| 7 | Fixing 25% | $105,000 | $728,000 | $3,943 |
| 9 | Completion 10% | $42,000 | $770,000 | $4,171 |
Total interest over the ten months from land settlement to handover is about $30,100. After completion the loan converts to principal and interest, about $4,867 a month over 30 years at the same rate. Check the full repayment with the mortgage repayment calculator.
Rent during the build
If the couple rent at $2,200 a month while building, they pay about $19,800 in rent on top of the $30,100 interest, roughly $50,000 in housing costs before they move in. That should sit in the budget from the start. Some lenders allow build interest to be capitalised into the loan instead of paid monthly, which helps cash flow but increases the final balance.
Delays and what they cost
Volume builders in Melbourne's north often quote eight to twelve months, but weather, trades and materials push many projects longer. In the example, each extra month after fixing costs about $3,943 in interest plus rent. Ask about liquidated damages for late completion before you sign. Our house and land versus established guide compares the timelines honestly.
Things to know before applying
- Lenders value the finished home, not land plus contract, so the valuation can come in below the combined price in new estates such as Donnybrook. A shortfall means more deposit.
- The First Home Owner Grant of $10,000 applies to new homes valued up to $750,000 and is usually paid at the base stage for a build.
- First home buyers pay duty on the land only, not the build, so a $350,000 lot attracts no duty under the exemption up to $600,000. Confirm with the stamp duty calculator.
- Variations and site costs outside the fixed-price contract come from your own pocket, and the build usually must finish within 12 to 24 months of approval.
Our house and land packages service covers the lender rules for turnkey and two-part contracts.
Frequently asked questions
Do I pay interest on the whole construction loan from day one?
No. You pay interest only on the amount drawn. At land settlement you pay interest on the land alone; each progress payment adds to the balance and the interest steps up. Full repayments start only after the completion payment, which makes a construction loan cheaper to hold during the build than a standard loan of the same size.
How long does a house and land build take in Melbourne?
Most volume-builder contracts in the northern growth corridor quote eight to twelve months from slab to handover, with land settlement and permits before that. Custom builds and delays can push the total to 18 months or more. Budget interest and rent for at least three months beyond the builder's estimate.
Can I capitalise construction interest into the loan?
Some lenders allow it, particularly for borrowers who would otherwise pay rent and interest at once. The interest is added to the balance instead of paid monthly, so the loan at completion is higher and long-term repayments rise slightly. Others require interest-only payments during the build. We can tell you which lenders on our panel offer each option.
Are progress payments the same for every builder in Victoria?
The 5/10/15/35/25/10 schedule is the statutory default for standard fixed-price contracts and is what most volume builders use. A builder can propose a different schedule if it is justified in the contract, and custom builders sometimes do. Your lender will only pay against stages that match the contract and a satisfactory inspection.
What happens if the valuation is lower than land plus build cost?
The lender lends against its valuation of the completed home. If that is below land plus contract, the gap must come from extra deposit or the loan exceeds the intended LVR and may need LMI. This is more common with heavily upgraded builds in new estates, so keep upgrades modest or hold savings in reserve.
Talk to GNT Finance
GNT Finance arranges construction and house and land loans for families building across Kalkallo, Donnybrook, Mickleham and Melbourne's north. We compare lender construction policies, time the drawdowns and help you budget for the build months, at no cost to you for our home-loan service in most cases. Book a free consultation or call 0426 403 703.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.