In this section you will learn about the process of building your own home, including how to find the right block of land, choose a builder, obtain a construction home loan and your obligations during the process.
- Finding a blockFinding a block
- Choosing and engaging a builderChoosing and engaging a builder
- House and land packages House and land packages
- Obtaining a construction loanObtaining a construction loan
- Progress StagesProgress Stages
- Completing the buildCompleting the build
- Building warranties Building warranties
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Finding a block of land that suits your needs
The first step to building your own home is determining where you want to live and what size and shape block of land you want to build on.
In the boxes below we highlight some of the key factors to consider when choosing a block. These factors are generalised and may not fit your specific circumstances.
Location
Consider where the blocks in relation to other amenities like shops, schools and public transport.
If the block is in a regional or rural area, it's also important to consider the properties location in relation to bushfire safety, or susceptibility to floods.
Orientation to the sun
The direction your house faces in regards to the sun will change the efficiency of your heating and cooling options throughout the year.
A block that has natural north-facing orientation will get more sun during the cooler months.
Soil quality and slope of the block
Be mindful that some soils (like clay) can expand and contract, meaning there may be extra costs to building the footing of your house. Additionally, if the block is in a particularly hilly or uneven area there may be additional costs to building.
Connected to utility services
You'll need documentation from the seller that certifies that all the necessary utility services are connected to the block.
For instance, utility services like water, sewerage, power, gas and telephone cable are necessary. If you live rurally and this is not possible, alternative arrangements need to be documented.
Certificate of title
The certificate of title tells you who is the registered owner of the block and would be transferred into the buyers name once the sale is complete.
If you are looking at a block in a new sub-development, it is important to check that each individual sub-division is registered with an individual certificate of title. This is to ensure official record of land ownership can be transferred.
Title boundaries
On the block's certificate of title there will be details of the legal title boundaries. It is important to check that the title boundaries are accurate and match what is being advertised.
Council zoning regulations
If you have found a block you like, it is important to check with the local council about any zoning regulations or planning restrictions in that area to make sure you will be able to receive council approval to build.
Choosing a builder
To begin narrowing down which builder you want to work with, consider the following factors.
- Type of house - Some builders may specialise in certain types of builds, for instance building with timber, building to be more sustainable or building to be fire safe.
- Present and future family needs - Think about how many bedrooms, bathrooms, car parks and outside spaces you will need to suit the people and pets who will live in your house. Different builders will cost these factors differently.
- Budget - Ask builders for their estimate of costs. A simple way of comparing different builders' quotes is by comparing their cost per square meter.
If you have a builder in mind, it is advised that you conduct your due diligence. This includes:
- Researching other homes or estates that the builder has built
- Visiting display homes
- Checking registration, licenses and complaints. You can check a builder's registration and licenses online via the Victorian Building Authority (VBA) website.
Engaging a builder's services
When you work with a builder or developer, it is critical to have a written contract. According to law, as of May 2024, any building project with a total value over $10,000AUD is required to have a domestic building contract, including for building, repairing, renovating or extending your home. However, regardless of price, it recommended to always have a written contract. A written contract is needed to settle future disputes. Without a contract you may forfeit your consumer rights.
For assistance with contracts, you can speak to a legal professional like a conveyancer or solicitor. See the Connect section for more information.
Types of building contracts
There are two main types of building contracts, including;
Fixed price contract
- This is the most common and widely used form of building contract because it gives you a fixed end price to budget for.
- The building contract has a fixed lump sum price for all specified building works including the builder’s margin and GST.
- The fixed price can change due to building variations and time delays outside the control of the builder.
Cost-plus contract
- As of May 2024, new cost-plus building contracts are only permitted on domestic builds above the value of $1,000,000 AUD
- The building contract has an estimated final price based on the agreed “scope of work” which is made up of the cost of building works plus a nominated builder’s margin percentage.
- Throughout the project, the builder must disclose all the building costs (i.e. provide copies of all invoices) and add the builder’s margin on top of all costs.
- This type of building contract is often used if it is too difficult to establish a fixed price at the time of quoting, due to unpredictable costs or very complex design details.
For more information on your rights and responsibilities to do with building contracts, it is advised you do personal research and speak to a legal professional like a conveyancer or solicitor.
Building contract checklist
Although the details of your contract will vary depending on type, each contract should include the following:
- be written in clear English,
- set out in full all the terms of the contract,
- give detailed descriptions of the work to be carried out,
- state the names and addresses of the parties to the contract,
- state the builder’s registration number as it appears on the builder’s registration certificate,
- state the contract price,
- state the amount of the deposit and progress payments as required by law. state the date the contract is effective (the date on which both parties have signed the contract),
- give clear advice about the five-day cooling-off period,
- include definitions of words and key phrases used in the contract,
- set out implied warranties, and
- contain an Approved checklist.
Source: Consumer Affairs Victoria.
What is a 'house and land' package?
House and land packages can be a purchase model that offers the advantages of building your own home, like flexibility in choosing design characteristic of your house, without the added responsibilities of organising a build yourself.
House and land packages are offered through developers, who take responsibility for project works.
Buying a house and land package usually consists of two steps: buying the land then, building the house.
Loans for each step can be arranged separately, which can include separate down payments (deposits), but are typically bundled together.
Unless you’re already aware of an estates being built in your chosen location, you can find new house and land packages advertised on all real estate websites, by going directly to developers themselves or through real estate agents.
Obtaining a construction loan
A construction loan is different from a regular home loan. If you plan to borrow money to finance your build, you will need to obtain a construction loan from a chosen lender.
When applying for a construction loan, your Lender will ask for some additional information to the documents typically required to lodge a home loan application.
These additional documents generally include:
- Your building plans.
- Council permits for your build.
- Your insurance provisions.
- Your building contract.
- Valuations of the land and proposed build.
- Proof of your builders registration and licenses.
The borrower will need to contribute a minimum deposit of 10-20% of the building contract price.
It is possible to get a home loan to purchase land and then, once you have worked out your building plans, obtain a construction loan to complete the build. However, this approach may incur greater fee's and interest.
If you plan to complete an owner-builder project you will need to talk to a lender about if they offer loans to owner-builders.
Drawdowns
Construction loans are divided up into stages, where funds are transferred from your lender to your builder. These payments are referred to as "drawdowns".
Each drawdown must align with the Payment Schedule outlined by your builder in your building contract.
It is common to only be required to make repayments on the funds that have been drawdown, not the whole loan.
For example, if the lender has only paid the first stage of the build, 15% of the overall loan, you will only be making repayments (principal and interest) on the 15%.
After all drawdowns are complete, the borrower begins paying repayments on the total loan as per a typical home loan.
The progress stages are determined by the building contract and your chosen Lender’s building loan payment schedule.
The deposit will be paid prior to any of the loan drawdowns beginning.
Progress stages
Most domestic builds will follow a similar process start-to-finish of distinct 'progress stages'.
These progress stages map out each part of the builder's work plan and align to the payment schedule included in your building contract.
After your construction loan is approved, your lender will send you and your builder a commencement letter - this is formal approval that construction can begin.
Before building starts, the builder will submit your development application and apply for the necessary permits to your local council for building to commence.
After each progress stage is complete, your builder will provide you with an invoice. The invoice needs to align with progress stages in the building contract.
Your lender will then inspect and valuate property at the end of each stage. If the lender is satisfied the stage is complete, they will process the drawdown for the next stage to begin.
Typical progress stages are outlined below. These stages are not exact, and it is the borrowers' responsibility to monitor when payments are due.
'Slab', 'base' or 'foundation' stage
This is the first progress payment stage.
It includes pouring the concrete slab, footings, pad and base brickwork.
Approximately 15-20% of funds are required.
'Construction' or 'frame' stage
Second progress payment stage.
Here the house frame is erected, including support structures, electrical conduits, plumbing and gutters.
Approximately 20% of funds are required.
'Lock up' or 'enclosed' stage
By this stage, the windows and doors, roofing, exterior and insulation are installed, meaning you can 'lock up' your house.
Approximately 20-25% of funds are required.
'Fixing' or 'fit out' stage
This is when internal fittings and fixtures are installed, such as your kitchen cupboards, appliances, bathroom, toilet, lights and power points. The home is now plastered and painted.
Approximately 30% of funds are required
'Practical completion' stage
When the final progress stage is complete, your builder will notify you of "practical completion", meaning your home is ready to live in.
Here the final progress payment is due. Approximately 10% of funds are required.
Completing the build
Once you have been notified of 'practical completion', the builder will provide you with a Certificate of Completion and a Certificate of Occupancy. You must take these documents to your lender to arrange the final drawdown.
Next, the final inspection must occur. This is where you can raise any concerns about the completion of the build, flag any issues or lodge a defects report. The builder is required to remedy any defects before you sign off on the build.
After the Lender processes the final payment, you will collect your keys and be able to move in.
Building Warranties
As part of your building contract, your builder will typically provide you with a warranty on the build.
You have rights under the law for the builder to uphold certain obligations with their warranty. You can find out more about how warranties function and your rights under the law on the Consumer Affairs Victoria webpage.
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We acknowledge the Traditional Custodians of the lands on which we work and live. We pay our respects to Aboriginal and Torres Strait Islander cultures; and to Elders both past, present and emerging. It always was and always will be Aboriginal Land.