How Much Deposit Do You Need for a Construction Loan?

A construction loan deposit works a little differently from a deposit on an established home. The lender is lending against land and a home that does not exist yet, so the maximum loan-to-value ratio (LVR), how the property is valued and the order in which money is spent all affect how much of your own money is needed.

In the lender wording we reviewed, many lenders allow construction loans up to 80% LVR without lenders mortgage insurance (LMI), and some go to 90% or 95% with LMI. Others cap construction at 70% or 80%, especially for specialist products, cost-plus contracts or certain locations. Land you already own can often count towards the deposit.

This guide explains how a construction loan deposit may be worked out, what costs sit outside the loan and how lender policies differ.

It is general information only, based on lender policy wording we reviewed in October 2026.

Related research: Can You Get a Construction Loan to Build a House in Australia?

How much deposit do you need for a construction loan?

It depends on the lender’s maximum LVR for construction and on your total project cost. As a broad guide from the wording we reviewed:

• around 20% of the total land and build cost, plus costs, is a common starting point for avoiding LMI
• around 5% to 10%, plus costs, may be possible with some lenders where LMI applies or a government scheme is used
• around 20% to 30% or more may be needed for specialist lenders, cost-plus contracts or owner builders

The deposit is the gap between what the project costs in total and what the lender will lend. Land equity, savings and grants can all help fill that gap.

How do lenders work out the LVR on a construction loan?

For most construction loans, lenders calculate the LVR against the expected value of the finished home, using an “as if complete” or “on completion” valuation. Some use the lower of that valuation and the total cost of land and build.

Macquarie’s wording, for example, says the LVR for construction loans is based on the lower of the on completion valuation or the cost to complete. If the valuer values the finished home below the total cost, the loan may be smaller than expected and the deposit needed may be larger.

Worked example: land plus build

Say the land costs $400,000 and the fixed price building contract is $500,000, a total of $900,000. If the on completion valuation is also $900,000, the maximum loan at different LVRs would be:

On top of the contribution, there may be stamp duty, legal and settlement costs, loan fees, LMI (above 80% in most cases) and any items outside the building contract. If the valuation came in at $850,000 instead, an 80% loan would be $680,000, and the contribution would rise to $220,000.

Can land you already own count as the deposit?

Often, yes. If you already own the land outright, or have paid down a land loan, the equity in the land can count towards your contribution. In the example above, owning the $400,000 block outright would cover more than the $180,000 contribution needed at 80%, before costs.

Lenders usually still want the land value confirmed by a valuation, and the loan is assessed against the land and build together.

Do you have to use your own money first?

Usually. Many lenders require your own contribution to be spent before they release loan funds for progress payments. CBA’s wording, for example, says customers must use all of their own equity, such as personal savings or a First Home Owners Grant, before any progressive payments are made from the loan towards the construction. Granite, WLTH and Zeus have similar wording that the consumer’s equity contribution must first be utilised to meet progressive payments.

This means your deposit is often used for the builder’s deposit and early stages, with the lender funding later stages.

Related research: How Do Construction Loan Progress Payments Work?

What costs sit outside the construction loan?

Some costs are not covered by the loan, or are only covered if the lender agrees and they are in the contract:

• stamp duty and transfer costs on the land
• legal and conveyancing fees
• loan application, valuation and progress inspection fees
• LMI, if it cannot be added to the loan
• variations agreed after the contract is signed
• landscaping, driveways, fencing and window coverings not in the contract
• connection costs for services
• interest during the build, if it is not capitalised

Firstmac’s wording says any contribution towards the building contract and any extras or variations are to be paid from the borrower’s own funds before progress draws are paid from the loan.

How does LMI affect a construction loan deposit?

Lenders mortgage insurance usually applies when the LVR is above 80%. It protects the lender, not the borrower, and its cost rises as the LVR rises. Some lenders allow the LMI premium to be added to the loan, which reduces the cash needed upfront but increases the loan amount and the interest paid over time.

Where LMI is added, lenders usually count it within the maximum LVR, so the amount available for land and build can be a little lower than the headline percentage suggests. LMI providers can also set their own limits on construction loans, such as maximum loan sizes in some locations.

How do lender policies differ on construction loan deposits?

We reviewed policy summaries for 40 Australian lenders (a mix of banks and non-banks) from a third-party broker policy tool, as at October 2026. This is a research sample of 40 lenders, not the whole market.

Maximum LVRs for construction differ widely, along with the conditions attached:

• CBA lists a maximum LVR for construction loans of 95% for securities valued under $3m, except for Home Guarantee Scheme loans.
• NAB lists up to 90% LVR for owner occupied BICOE (building in course of erection) loans with a fixed price contract, and up to 90% LVR for investment loans under a building contract, noting that LVR restrictions may apply in some cases, such as restricted postcodes. NAB also says construction lending is not available to owner builders.
• Firstmac lists a maximum LVR of 90%, with LMI required above 80%, and maximum loan amounts by location category.
• Bank of Us lists LVR figures of 95% with LMI, 80% without LMI and 65% for owner builders for construction lending.
• Bluestone lists a maximum LVR at settlement of 70% of land value including fees, and 80% of the expected on-completion valuation, for metro locations only.
• VMG says the initial LVR can be 80% against end value for a package build, and if it is not a house and land package the maximum LVR is 70%.
• Bank Australia lists a maximum LVR of 65% for cost plus building contracts.
• Macquarie lists a maximum LVR of 80% for construction loans.

These are examples of how differently lenders approach the same situation. These examples are not recommendations, and policy must be confirmed before an application is lodged. Policies change often, so confirm the current position with a broker before you apply.

Policy summary as at October 2026, from a third-party broker policy tool (export dated 20 October 2026). The lender guides behind it are dated between July 2026 and October 2026 for the lenders named on this page. The sample counts on this page cover all 40 lenders, whose guides are dated between October 2025 and October 2026. For example, CBA's guide is dated 7 July 2026. Lender policies change often and may have changed since.

Can you build with a 5% deposit?

Possibly. The Australian Government 5% Deposit Scheme lists vacant land with a building contract among the types of home that can be bought, as long as the property is priced at or below the location’s price cap (scheme rules as at November 2026; check the current rules with Housing Australia). Participating lenders still apply their own construction policies. Source: firsthomebuyers.gov.au FAQs.

Outside the scheme, a 5% deposit for construction usually means LMI, and only some lenders allow construction lending at 95%. Our 5% construction loan guide covers this in more detail.

Related research: Can You Get a Construction Loan With Only a 5% Deposit?

What if you buy the land first?

Buying the land first and building later is common. The land loan is assessed on the vacant land, which often has a lower maximum LVR, and the construction loan is assessed later on the land and build together. Equity built up in the land between the two stages can reduce the cash needed for the build.

Related research: Can You Buy Land First and Add a Building Contract Later Under the 5% Deposit Scheme?

Does the type of building contract matter?

Yes. Most lenders prefer a fixed price building contract with a licensed builder and a standard progress payment schedule. Cost-plus contracts and owner builder projects are often treated differently, because the final cost is less certain. In the wording above, Bank Australia lists 65% for cost plus contracts, Bank of Us lists a separate 65% figure for owner builders, and NAB says construction lending is not available to owner builders.

What documents may lenders ask for?

• a signed fixed price building contract
• council approved plans and specifications
• the builder’s licence and insurance details
• the land contract or title, and land valuation
• evidence of savings, land equity or grants for your contribution
• a quote or list of items outside the contract
• income documents and details of existing debts

10 common mistakes with construction loan deposits

1. Basing the deposit on the build price alone, rather than land plus build.
2. Assuming the valuation will match the total cost.
3. Forgetting stamp duty and other costs on the land.
4. Leaving no buffer for variations or price rises.
5. Assuming loan funds are used before personal funds.
6. Not checking whether LMI can be added to the loan.
7. Overlooking items not included in the building contract.
8. Assuming every lender offers construction loans at 90% or 95%.
9. Signing a cost-plus contract without checking the LVR limit.
10. Spending savings on extras before the loan is approved.

How to improve your chances before applying

• Get a fixed price building contract with clear inclusions.
• Add up land, build, costs and a buffer to see the true total.
• Keep savings and land equity documents ready.
• Avoid new debts while the loan is being assessed.
• Check your eligibility for any grants or government schemes.
• Allow for interest during the build in your budget.

Is it worth waiting before applying?

Waiting can help if a larger deposit would move the loan below 80% and avoid LMI, or if land equity is still building. Building costs can also change, though, and a longer wait may mean a higher contract price. Comparing the cost of LMI with the cost of waiting can make the trade-off clearer.

Example scenarios

Scenario 1: First home buyer with 6% saved

A first home buyer has 6% of a $750,000 land and build package and is eligible for the 5% Deposit Scheme. A participating lender may consider the loan at up to 95%, subject to its construction policy and the price cap.

Scenario 2: Land owned outright

A couple own a $350,000 block outright and sign a $450,000 build contract. The land equity alone is more than 20% of the $800,000 total, so the lender may not need a cash deposit, although costs still need to be covered.

Scenario 3: Valuation shortfall

A buyer expects an 80% loan on a $1,000,000 land and build cost, but the on completion valuation is $940,000. Lenders using the lower of cost and valuation would lend about $752,000, leaving a larger contribution than planned.

Scenario 4: Cost-plus contract

A borrower is building under a cost-plus contract. Some lenders cap these at a lower LVR, such as 65%, so the contribution could be well over 30%.

So, how much deposit do you need for a construction loan?

It depends on the lender, the contract and the valuation. Around 20% of the total land and build cost, plus costs, avoids LMI with many lenders, and some lenders allow 90% or 95% with LMI or under a government scheme. Specialist lenders and non-standard contracts often need more.

Your own funds are usually spent first, so the deposit needs to be ready before the build starts.

Need help with a construction loan deposit?

A Fundd mortgage broker can help you compare options and check whether current lender policies may suit your build. We can review your building contract, land details and savings with you before you apply.