Construction policy quick view
We offer flexible options for owner-occupied and investment home loan construction, including major renovations and knock-down rebuilds.
| Policy area | Our approach |
|---|---|
| Loan purpose | Construction of new homes Knock-down rebuilds Major renovations for both owner-occupied and investment properties. Fixed-price building contracts with licensed builders |
| Maximum loan amount | Up to $2 million. |
| LVR | Up to 95%, depending on borrower profile, property type and documentation. |
| Interest-only | Interest-only repayments available during construction for up to 18 months, with interest charged only on funds drawn. |
| Fee capitalisation | Establishment fees may be capitalised up to the maximum LVR. |
| Redraw/Offset sub-account | Redraw and one offset sub-account available post construction period, at no extra cost. |
| Loan options | Prime and Near Prime - alt doc and full doc options. |
| Progress payments | Standard progress drawdowns based on builder invoices and valuation inspections. Typically 5, however we’ll accept up to 6 progress payments. |
Time frames and progress payment schedule:
Construction should commence drawdowns within six months of settlement and be fully completed within 18 months of the initial drawdown. A standard five-stage progress payment schedule is:
| Stage | Typical claim |
|---|---|
| Slab/foundation | 15% |
| Frame | 25% |
| External lining | 25% |
| Fixing | 25% |
| Completion | 10% |
A maximum of six stages is allowed.
Progress inspections
A minimum of four progress inspections are required during construction:
slab
frame/roof
lock-up
practical completion
The inspections are typically carried out by the valuer who completed the original "As If Complete" valuation.
Pepper Money arranges the inspections, and the borrower is responsible for the inspection costs.
Vacant land policy
| Stage | Typical claim |
|---|---|
| Maximum LVR | Up to 85% for eligible vacant residential land. |
| Maximum loan | Up to $1.5 million at 75% LVR, or $1 million at 85% LVR, depending on the location category. |
| Land type | Residential vacant land only. |
| Security categories | Primarily Category 1 and 2 locations. |
| Maximum land size | Generally 5 acres (approximately 1 hectare) for standard residential vacant land. |
Generally, not acceptable are:
Owner builders projects
Labour only
Non-residential construction
Non-arm's length arrangements
Property development projects
Subdivision or land development
Multi-stage developments
Construction for resale by developers
Residual developer stock
Display homes (except in limited circumstances)
Kit homes or relocatable dwellings
Strat titles properties
Rural or farming land
Large development sites.
6 months ABNs
Supporting documentation typically needed:
Executed fixed-price building contract from licenses builder (not owner builder)
Council-approved plans and specifications
Builder's licence and registration details
Quantity surveyor or valuation (where required)
Progress payment schedule
Evidence of funds to complete the project if applicable.
Construction All Risk Insurance (including public liability) from the builders with a Certificate of Currency showing Pepper Finance Corporation Limited as an interested party
Builder's Warranty/Home Building Compensation Insurance
Builder's bank account details on builder letterhead
Quotations for any approved non-construction items
Income types considered
PAYG income
Full-time, part-time and contract employment (PAYG from day 1)
Casual and second-job income
Additional employment income
Overtime
Commission
Bonuses
Ongoing allowances (excluding housing)
Car allowances
Self-employed income
Full Doc & Alt Doc options
Self-employed contractors (ABN holders)
Rental income
Standard residential rental income
Commercial rental income
Airbnb / Stayz / short-term rental income
Foreign rental income
Investment income
Interest income
Dividend income (including franked dividends)
Government and pension income
Aged Pension
Disability Pension
Carer Pension
Department of Veterans' Affairs (DVA) Pension
Australian and UK superannuation pensions
Family and support payments
Family Tax Benefit A and B
Parenting Payments
Child Support
For more information check out our Helpful Guide to Construction.
Ready to help your clients find a loan that suits them?
Frequently Asked Questions
We support new residential dwelling construction completed by a licensed builder under a fixed-price building contract.
The construction contract must:
Be with a licensed builder
Cover all construction works
Be a fixed-price contract
Be in a standard housing industry association (HIA), or equivalent format
Have a construction term not exceeding 12 months
Contain no more than six progress payment stages
Only one executed building contract can be accepted.
All contract variations must be submitted to Pepper Money for review and approval before work commences. Any cost overruns or increases to construction costs are generally the responsibility of the borrower.
Yes. For Approval in Principle, Pepper Money can assess:
A draft fixed-price building contract
Draft plans
Supporting quotations
An "As If Complete" valuation should only be ordered once the valuer has sufficient documentation.
Executed documents must be provided before construction funding commences.
Examples of non-construction items include:
Solar panels
Driveways
Landscaping
Specialist electrical works
Where these items are not included in the fixed-price building contract:
Quotations must be provided
Completion may need to be verified by the valuer
Payment is generally made after contractual construction progress claims have been completed
Alternatively, borrowers may pay first and be reimbursed upon providing evidence of payment and completion.
Before the first progress payment, Pepper Money requires:
Executed fixed-price building contract
Council-approved plans and specifications
Builder registration or licence details
Construction all risk insurance (including public liability)
Certificate of currency noting pepper finance corporation limited as an interested party
Builder's warranty or home building compensation insurance
Builder bank account details on builder letterhead
Quotations for any approved non-construction items
Where draft documents were provided at approval stage, executed copies must be supplied before any construction funds are released.
The customer's contribution must be used first.
Where loan funds are being used to purchase vacant land or refinance existing vacant land debt, the required equity contribution must be available at settlement.
As the First Home Owner Grant is generally not paid until slab or footings have been completed:
Customers must initially contribute equivalent funds at settlement, or
Where pepper money has submitted and received grant approval, the equivalent amount may be used to assist land settlement
Any release of funds must remain within approved LVR requirements..
For more information about the First Home Owner Grant, head here.
Construction should commence drawdowns within six months of settlement and be fully completed within 18 months of the initial drawdown. Applications outside these parameters must be referred back to Pepper Money for review.
Progress payments:
Require a signed pepper money progress payment authority from all borrowers
Must be supported by the builder's invoice
Are paid directly to the builder via electronic funds transfer. Funds are not paid to borrowers.
Are released once valuation inspection requirements have been met
Before final funds are released, Pepper Money requires:
Final builder invoice
Completed progress payment authority
Final valuation inspection confirming works completed
Building insurance
Certificate of occupancy (or equivalent where required)
Pepper Money may withhold future progress payments if:
The loan falls into arrears
Required inspections have not been completed
Required construction documentation has not been provided
Yes, where:
It forms part of the building contract progress schedule
All loan and construction documents have been completed
The maximum LVR is not exceeded
Maximum deposit:
5% of contract value nationally
6.5% in Western Australia
Prior to final drawdown:
Building insurance must be in place
Pepper finance corporation limited must be noted as mortgagee/interested party
Cover must be at least equal to the replacement value recommended in the valuation
A Certificate of Occupancy is generally required.
Where a Certificate of Occupancy (or equivalent) is not required under local legislation, the valuer must confirm the property has been completed in accordance with approved plans and specifications.
A Certificate of Occupancy is generally required.
Where a Certificate of Occupancy (or equivalent) is not required under local legislation, the valuer must confirm the property has been completed in accordance with approved plans and specifications.
Pepper Money may waive this requirement in limited circumstances at its discretion.
During construction:
Monthly interest-only repayments apply
Once construction is complete:
The loan converts to principal and interest (P&I) repayments
Borrowers may request monthly, fortnightly or weekly repayment frequencies
Pepper Money must approve the replacement builder before any work commences.
The new builder needs to provide:
a new executed fixed-price contract
builder licence details
Builder's Warranty Insurance
Construction All Risk Insurance and Certificate of Currency
The outgoing builder must confirm:
They no longer have an interest in the project
No monies are outstanding
The stage of construction completed
They will undertake no further works
No further funds will be released until Pepper Money has formally approved the new builder.
Important Information
Information is correct as at [Product guide date] 2026 and subject to change at any time.
This content is for accredited Pepper Money brokers, introducers and intermediaries, including those applying for accreditation. It shouldn't be distributed to or relied upon by consumers.
All Applications are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply. Information provided is factual information only, and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
