Day 17: Construction Loans vs Traditional Mortgages: Which Is Right for Your Build?
Published: January 31, 2026
Reading Time: 8 minutes
Location Focus: Gold Coast, QLD
Construction loans and traditional mortgages serve different purposes. A traditional mortgage is used to purchase an existing property. A construction loan is used to finance the building of a new home or renovation of an existing property.
Construction loans work differently from traditional mortgages. With a construction loan, funds are released in stages as construction progresses. You pay interest only on the amount drawn, not the full loan amount. Once construction is complete, the loan converts to a traditional mortgage.
Traditional mortgages provide funds upfront for purchasing an existing property. You begin repaying the full loan amount immediately. Interest is calculated on the full loan balance.
For Gold Coast builders and investors, construction loans offer advantages. You can build your dream home or investment property exactly as you want it. You have flexibility to modify the design during construction. You can potentially save money by building rather than purchasing an existing property.
However, construction loans carry risks. Construction can be delayed, increasing your borrowing costs. Construction costs can exceed your budget. If construction stalls, you may be paying interest without the property being completed.
A mortgage broker can help you decide whether a construction loan or traditional mortgage is right for your situation. A broker can also help you structure your construction loan to manage risks and optimize your borrowing.
Call to action: Considering a construction project? Call Frontier Finance at 0413 798 731. Our brokers can help you explore construction loan options and find the best financing for your build.