Unlock the secrets to Construction Loan Fees

What Construction Loan Fees Actually Cost

Construction loan fees typically add $2,000 to $4,000 to your upfront costs, with the biggest chunk coming from progressive drawing fees charged each time the lender releases funds to your builder. You'll also pay standard application and valuation fees, but the progressive payment structure introduces costs that don't exist with a regular mortgage.

Most lenders charge between $300 and $500 per progress payment. If your build involves six drawdowns across the construction phase, that's an extra $1,800 to $3,000 on top of your standard loan establishment costs. Some lenders bundle these into a flat construction administration fee, while others itemise each inspection and release separately.

The difference matters when you're comparing quotes. A lender advertising a lower interest rate might charge $500 per drawdown, while another with a slightly higher rate caps the entire construction phase at $1,200 flat. Over a typical build timeline, the second option saves you money even if the ongoing rate sits 0.10% higher.

Application and Valuation Costs for a Build

Application fees range from zero to around $600 depending on the lender. Valuation costs sit between $300 and $800 for a standard residential build, but you'll need two valuations during the process. The first assesses the land value before construction starts. The second, often called a progress inspection, happens at each drawdown stage to confirm the work completed matches the amount being released.

Some lenders roll progress inspections into their flat construction fee. Others charge separately for each visit, which can push your total valuation costs past $2,000 if you're dealing with a remote block or a custom design that requires specialist assessment. FIFO workers building in regional Western Australia or Queensland mining towns often cop higher inspection fees because valuers charge travel costs on top of their standard rates.

Consider a civil engineer building in a Pilbara town. The land valuation might cost $600, and each of six progress inspections another $400 due to the valuer flying in from Perth. That's $3,000 in valuation and inspection fees alone before you factor in application or drawing charges.

Progressive Drawing Fees and How They're Charged

Progressive drawing fees apply every time the lender releases funds to your builder after a progress inspection confirms the stage is complete. Most builds involve five to seven drawdowns. The first covers the base and frame, followed by stages like lock-up, fixing, practical completion, and final handover.

Lenders structure these fees three ways. Some charge a flat rate per drawdown regardless of the amount released. Others charge a percentage of the drawn amount, typically 0.50% to 1.00%. A third group bundles all progress payments into a single upfront construction administration fee, usually between $1,200 and $2,000.

If you're building under a fixed price contract with a project builder, six drawdowns at $400 each adds $2,400 to your costs. If you're doing an owner builder project with more frequent smaller drawdowns, that figure climbs quickly. Owner builder finance often attracts higher per-drawdown fees because the lender takes on more risk without a registered builder managing the project.

Interest Charges During the Construction Phase

You only pay interest on the amount drawn down, not the full loan amount. During construction, most lenders require interest-only repayments, which keeps your monthly outgoings lower while you're still covering rent or another mortgage elsewhere. Once the build reaches practical completion, the loan converts to a standard principal and interest repayment schedule.

The interest calculation works differently to a typical home loan. Each time funds are released, your loan balance increases and so does your monthly interest charge. If your builder takes eight months to complete the project and you've drawn $300,000 by month four, you're paying interest on that $300,000 from that point forward, even though the full loan might be $450,000.

Some FIFO workers underestimate this. If you're paying rent in Perth at $2,400 per month while also covering interest-only payments that climb from $800 in month one to $2,200 by month eight, your cashflow gets squeezed harder than it would with a standard purchase. Factoring this into your budget before you start the build prevents problems when you're halfway through and the bills start stacking up.

Settlement and Discharge Costs

Settlement fees apply twice with construction loans for FIFO workers. The first settlement covers the land purchase. The second happens when the build completes and the loan converts from construction to a standard mortgage. Each settlement typically costs $800 to $1,500 depending on your state and whether you use the lender's panel solicitor or your own.

Discharge fees don't apply unless you refinance or sell before the loan term ends, but they're worth knowing about upfront. Most lenders charge between $300 and $500 to discharge a construction loan, the same as a regular mortgage. If you're planning to refinance once the build is complete to lock in a lower rate or access equity, factor this into your timeline and budget.

Title registration and government charges vary by state. In Western Australia, land transfer duty on a $400,000 block runs around $13,000, with another $200 in registration fees. In Queensland, stamp duty on the same purchase sits closer to $8,500. These aren't lender fees, but they're part of the upfront cash you'll need alongside your deposit and construction loan establishment costs.

Comparing Fixed Fee Versus Per-Drawdown Structures

Fixed fee structures suit most FIFO workers because they cap your exposure regardless of how the build progresses. If your builder requests an extra drawdown to cover variations or stage the project differently, you're not hit with another $400 charge each time.

Per-drawdown pricing makes sense if you're confident the build will follow a standard five-stage schedule without changes. A project home on a flat block with a registered builder using a fixed price building contract usually runs to plan. Custom builds, sloping sites, or regional locations where weather delays are common tend to blow out the drawdown count.

In our experience, FIFO workers building while on-site interstate or offshore benefit from fixed fee structures because they can't micromanage the builder or chase approvals when something shifts. Paying an extra $300 upfront to avoid surprise charges six months into the build makes sense when you're in the Pilbara for three weeks at a stretch with limited phone coverage.

Land and Construction Package Fees

Developers offering house and land packages sometimes negotiate discounted loan fees with specific lenders as part of the package. You might see offers advertising zero application fees or capped construction administration costs if you finance through their preferred broker or lender panel.

These deals can be legitimate, but check the interest rate and comparison rate against what you'd get independently. A lender waiving a $600 application fee but charging 0.20% more on a $450,000 loan costs you $900 per year in extra interest. Over five years, that's $4,500 versus a one-time $600 saving.

Some packages lock you into starting construction within six months of settlement on the land, or you forfeit the discounted loan terms. FIFO workers waiting on council approval for a custom design or dealing with delays in building material supply can find themselves stuck with penalty rates or forced to rush into a build before they're ready. Read the disclosure documents carefully before you commit.

What You Won't Find on the Fee Schedule

Most lenders don't list the cost of delays. If your builder goes into administration halfway through the project, you're still paying interest on the drawn amount while the build sits incomplete. Rectifying defects or engaging a new builder to finish the work often requires renegotiating the construction loan, which can trigger variation fees or even a full reapplication.

Owner builder projects attract higher scrutiny and often higher fees across the board. Lenders charge more for progress inspections, require more frequent drawdowns, and sometimes cap the loan amount at a lower percentage of the total project cost. If you're a civil engineer with the skills to project manage your own build, the savings on builder margins need to exceed the extra financing costs and the cashflow risk of managing subcontractors while you're on-site.

Variations to the building contract after the loan is approved can also trigger reassessment fees. If you upgrade the kitchen or add a third garage during construction, the lender might require a new valuation to confirm the increased loan amount is still within their lending criteria. That's another $600 to $800 you didn't budget for.

Refinancing After Completion to Cut Ongoing Costs

Once your build reaches practical completion and the loan converts to a standard mortgage, you're free to refinance without penalty in most cases. Some FIFO workers use a construction lender that approves builds faster or has better progress payment terms, then refinance to a lower rate lender once the property is finished.

This approach works if the money you save on ongoing interest exceeds the cost of refinancing, typically $2,000 to $3,000 in application, valuation, and discharge fees. If you're locked into a higher construction loan rate but can access a lower interest rate within six months of completion, the refinance pays for itself within the first year.

The timing matters. Refinancing before the final drawdown means you'll need to reapply for construction finance with a new lender, which resets your fee schedule. Waiting until the build is complete and titled in your name lets you refinance as a standard property purchase, which avoids construction-specific fees entirely.

Call one of our team or book an appointment at a time that works for you. We'll walk through the fee structures from lenders that understand FIFO income and won't slug you with charges that don't make sense for your roster.

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