Construction loans work a bit differently to regular home loans.

The funds from the purchase are not provided to your builder in one lump sum payment, they are done in multiple stages based on how much they need to commence the next stage of your build. These stages are referred to as progress payments.

The benefit of a construction loan is that while you are building, you are only required to pay interest only based on which stage of the build you’ve reached and based on the loan balance that has been drawn.

Most lenders will only allow a variable interest rate during construction. If you are purchasing a house and land package, the home and land is done together in one loan. There are however some lenders that require the loans separated (one for the build and one for the land) even if you are purchasing them at the same time.