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Costs of building or renovating

Budgeting for the associated costs of building a home

When it comes to choosing a home loan to help build your new home, there are a number of associated costs to consider. You’ll need to factor in stamp duty, legal costs, insurance, searches, inspections, council rates and how you’ll make progress payments.

Progress payments

Before building begins, you’ll be required to pay a deposit to your builder as well as paying a deposit if you are buying land. As the building work progresses, you’ll be required to make progress payments to the builder - most commonly five payments at the end of the five agreed-upon stages of construction.

Cost of building or renovating

Budgeting for the costs of building a home

When it comes to building your new home, don’t forget to add in those extra costs. That is, you may need to factor in stamp duty on a land purchase, legal costs, insurance, a bank valuation, council costs to submit your plans and any certification expenses. Plus it’s always good to leave a buffer for unexpected costs too.  

Ask your Bank of Melbourne home loan expert if these costs can be added to your loan amount. 

Pay as you go

Our specially designed building option helps you structure the cost of buying land and drawing down your loan progressively to pay your builder as they go. So instead of paying interest on your approved loan amount from the start, you’ll only be charged interest on your balance as it grows with each drawdown. 

Before building begins, review the number of stages of construction to understand when you’ll need to pay the deposit to your builder. Then, as building work progresses, you’ll need to make progress payments to your builder. Standard building contracts generally contain five stages, with payment due at the end of each, once you (and our bank valuer, if required) have approved the inclusions and quality of the finished stage.

Stamp duty

There are two types of stamp duty payable:

  • On the mortgage - stamp duty depends on how much you borrow, and the purpose of your loan
  • On the transfer of the property - stamp duty depends on the price of the property.

Use our handy Stamp Duty Calculator to determine how much stamp duty you may be required to pay. Your state Stamp Duty office can provide you with information on how much stamp duty you have to pay, how it is calculated and if you are entitled to a rebate, exemption or deferred payment.

Legal costs

Your main legal costs are the fees charged by your solicitor/conveyancer for the conveyance – the transfer of property ownership from one person to another. You can save money by taking care of legal requirements yourself, but it takes a lot of time and effort and you’ll be responsible if there are any problems.

You may want to consider a solicitor or a conveyancer. The Law Society in your state and the Australian Institute of Conveyancers can refer you to solicitors or conveyancers in your area.

Searches and inspections

Your solicitor/conveyancer/settlement agent should advise you about the searches and inspections you need. These may include:

  • Surveys - a survey sets out the property’s boundaries.
  • Title searches - identifies the person who owns the property and any other interests in the property that affect the title.

Lender's Mortgage Insurance

Generally, Lender’s Mortgage Insurance is required if you are borrowing more than 80% of the value of the property; however this condition varies depending on property type, location of the property, loan type, etc. Lender's Mortgage Insurance protects the lender, not the borrower(s), against loss in the event that you default on the loan. It should not be confused with mortgage protection insurance for borrowers.

In the case of mortgagee exercising power of sale, if the property is subsequently sold by the lender at a price that does not cover the outstanding amount of the loan in full, Lender’s Mortgage Insurance will cover the difference in the debt still owed to the Bank after the sale of the property.


From the settlement date (the date the sale is finalised) you are responsible for all the council and water rates on a property. You may have to reimburse the previous owner on a pro rata basis for any payments they have already made. Your solicitor/conveyancer will work these out for you.

Building insurance

You should check that your builder has his or her own insurance in place before construction begins. Bank of Melbourne requires you to have building insurance in place before we make the final progress payment on your loan; this insurance is generally not available until the ‘practical completion’ stage of construction is finished. Learn more about building insurance at Bank of Melbourne.

Talk to us about building or renovating your home

If you’d like to talk about the costs associated with building a home, speak to a Bank of Melbourne home loan expert on 1300 304 660 or drop by a Bank of Melbourne.

The Detail

The information on our website is prepared without knowing your personal financial circumstances. Before you act on this general information, please consider if it’s right for you. If you need help, call 13 22 66.