Construction loans are suitable for structural work in your home, for example, if you’re adding a new room or making changes to the roof.

Construction loans give homeowners the opportunity to access larger sums of money, with the amount dependent upon the expected value of the property after renovations are completed.

The advantage of a construction loan is that the interest is calculated on the outstanding amount, not the maximum amount borrowed. This means you have more money available in your kitty, but only pay interest on the money you choose to spend.

When applying for a construction loan, council approval and a fixed price-building contract are required. Your lender will appoint an assessor to value your construction at each stage of the renovation. This will happen before you pay your instalment.

When looking at both these loans you can also call on other property you own to boost your overall borrowing amount if you wish.