SITE TO COMPLETION

Development Finance

A development loan is not approved on your income. It is approved on a feasibility, a total development cost, a builder’s contract and an exit. Get those four right and the funding follows.

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Lender panel
40+
Funding basis
Cost and gross realisation
Draws
QS certified
Sources
Bank, non-bank, private

Is this you?

If any of these are true, we can help.

Talk it through

A builder or developer funding a small to mid-sized residential project
A landowner subdividing and needing civil works funded before any sale
A developer whose presales are short of the bank’s debt cover requirement
An owner refinancing a completed project into a residual stock facility
A first-time developer who needs the feasibility stress-tested before committing

How it works

Three moves, in plain words.

Initial report before settlement
The QS reviews the contract, the costings and the program, and tells the lender whether the project can be built for the stated cost in the stated time. If the QS says the budget is light, the lender will require more equity or a bigger contingency before drawdown.
Land settles, equity goes in first
Most lenders require the developer’s equity to be fully contributed before debt is drawn. Expect to fund land, early professional fees and some site costs from your own funds.
Progress claim from the builder
The builder claims for work completed to date under the contract schedule.

Send us the numbers as they stand.

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The feasibility is the application

A development lender is underwriting a set of assumptions about a project that does not exist yet. The feasibility is where those assumptions live, and it is read harder than any other document in the file.

Land cost, including duty and acquisition costs, and whether the land is already owned and at what carrying value.
Construction cost under a contract, ideally fixed price with a reputable builder, plus a schedule of works.
Professional fees: architect, engineers, planning, surveyor, project management.
Statutory costs, headworks and authority contributions, which are routinely underestimated.
Finance costs, including establishment, line fees, interest capitalised over the program and the exit fee.
Selling and marketing costs, agent commission and legals on each sale.
Contingency. A project without a real contingency line is not conservatively costed, it is optimistically costed.
Gross realisation, supported by evidence rather than hope, with GST treatment stated.

Add the first seven and you have the Total Development Cost. The relationship between the loan and the TDC is the loan to cost ratio. The relationship between the loan and the gross realisation is the other ratio the lender tests. Both have to sit inside appetite, and the tighter of the two sets the loan.

Where the money goes in a total development cost

Land, including duty$2,400,000
Construction under contract$4,600,000
Professional and statutory costs$640,000
Finance costs, interest capitalised$520,000
Selling and marketing$340,000
Contingency$300,000

Construction is the line everybody models. The four small ones together are larger than most first feasibilities allow for, and the contingency is the one that gets trimmed when the land was bought at the wrong number.

Illustrative projection only. Not a quote and not an offer of credit.

View as a table

Component	Amount	Share
Land, including duty	$2,400,000	27%
Construction under contract	$4,600,000	52%
Professional and statutory costs	$640,000	7%
Finance costs, interest capitalised	$520,000	6%
Selling and marketing	$340,000	4%
Contingency	$300,000	3%
Total	$8,800,000	100%

Total Development Cost: Land, construction, professional fees, statutory costs, finance costs, selling costs and contingency, added together. Every ratio a lender applies starts here.
Loan to cost: The loan measured against the Total Development Cost. It sets how much of the project you are expected to fund yourself before any debt is drawn.
Gross realisation: The total expected sale proceeds of the finished product, with the GST treatment stated. The loan is tested against this as well, and the tighter of the two ratios sets the limit.
Contingency: Money set aside for what the drawings did not show. A nominal contingency reads to a credit officer as an optimistic feasibility rather than a lean one.

The detail

Presales and debt cover

For apartment and townhouse projects, most bank lenders want qualifying presales before a cent is drawn. The measure is debt cover: the value of qualifying presale contracts against the loan, sometimes including interest and selling costs.

What usually makes a presale qualify
Test	What lenders typically want
Contract status	Unconditional, or conditional only on registration or completion
Deposit	Paid and held in trust, or a bank guarantee
Purchaser type	Genuine arm’s length buyers
Related parties	Limited or excluded from the count
Concentration	A cap on how many can go to one purchaser or one agent
Foreign purchasers	Often capped as a proportion of the total
Sunset date	Sitting comfortably beyond the expected completion

Presales cost margin. A developer sells early at a discount to satisfy a lender, then watches the market move. This is where non-bank and private construction lenders earn their place: several will fund with reduced presales or none at all, at a higher cost of funds. The right question is not which is cheaper on the rate. It is which produces the better net result once you account for the discount you would have given away in presales.

Funding with presales

The lowest cost of funds available on a construction facility, from banks and the larger non-banks.
Qualifying contracts have to be unconditional, arm’s length, properly deposited and inside the sunset date.
Selling early usually means selling at a discount, and that discount is a permanent cost to the project.
The program does not start until the debt cover test is met, which can cost a construction season.

Funding with reduced or no presales

Available through non-bank and private construction lenders, priced materially higher.
You hold the stock and sell into the completed product rather than off the plan.
The feasibility has to carry the heavier finance line, so contingency and margin matter more.
The comparison that counts is the net result at the end, not the rate on the term sheet.

The quantity surveyor and the draw process

Development money is not advanced as a lump sum. It is drawn in stages against work that has been done and certified, which is why a quantity surveyor is appointed on almost every construction facility.

01
Initial report before settlement
The QS reviews the contract, the costings and the program, and tells the lender whether the project can be built for the stated cost in the stated time. If the QS says the budget is light, the lender will require more equity or a bigger contingency before drawdown.
02
Land settles, equity goes in first
Most lenders require the developer’s equity to be fully contributed before debt is drawn. Expect to fund land, early professional fees and some site costs from your own funds.
03
Progress claim from the builder
The builder claims for work completed to date under the contract schedule.
04
QS inspects and certifies
The QS attends site, verifies the work in place, and certifies the amount payable. Critically, the QS also runs a cost-to-complete test: is there still enough left in the facility to finish the job. If not, funding pauses until the shortfall is covered.
05
Lender advances, retention held
Funds flow, usually with a retention held against defects and the last stage. Interest is generally capitalised into the facility rather than paid monthly, which is why the interest line in your feasibility has to be right.
06
Practical completion, then the exit
Occupancy certificate, titles registered where subdivision is involved, then settlements of presold stock repay the facility. Anything unsold moves to a residual stock loan.

Work in place on a site, which is the only thing a construction lender will advance against — Nothing is released against a program or an intention. The quantity surveyor certifies what has actually been built, then tests whether the money left in the facility will finish the job.

A small project program, month by month

Before drawdown
The quantity surveyor reviews the contract, the costings and the program. Developer equity is contributed in full before any debt is drawn.
Months 1 to 2
Site establishment and civil works. The first progress claims are made and certified.
Months 3 to 11
Construction. Claims monthly, each one inspected, certified and cost-to-complete tested before funds are released.
Month 12
Practical completion and occupancy certificate. Retention is still held against defects.
Months 13 to 15
Titles register where subdivision is involved, presold stock settles, and the construction facility is repaid.
From month 15
Anything unsold moves to a residual stock loan. Arrange it during construction, not in the month the facility expires.

Interest capitalises across every one of those months. That is why the finance line in a feasibility has to be built from the program rather than from a round number, and why a slipped season costs more than the extra weeks look like they should.

Illustrative program only. Real durations depend on the project, the builder and the authorities.

View as a table

When	What happens
Before drawdown	The quantity surveyor reviews the contract, the costings and the program. Developer equity is contributed in full before any debt is drawn.
Months 1 to 2	Site establishment and civil works. The first progress claims are made and certified.
Months 3 to 11	Construction. Claims monthly, each one inspected, certified and cost-to-complete tested before funds are released.
Month 12	Practical completion and occupancy certificate. Retention is still held against defects.
Months 13 to 15	Titles register where subdivision is involved, presold stock settles, and the construction facility is repaid.
From month 15	Anything unsold moves to a residual stock loan. Arrange it during construction, not in the month the facility expires.

Where the funding comes from

Source	Typically wants	Trade-off
Bank construction facility	Strong presales, experienced developer, fixed price contract	Lowest cost, slowest, least flexible
Non-bank construction lender	Reduced presales, sound feasibility, credible builder	Higher cost, faster, more commercial view
Private construction funding	Equity in the land and a clear exit	Highest cost, fastest, used for short programs or rescues
Mezzanine or preferred equity	A gap between senior debt and developer equity	Expensive, second-ranking, sizes the project up
Residual stock loan	Completed, titled, unsold stock	Repays the construction facility and buys time to sell properly

Most projects we see are funded by one of the first three. The residual stock loan at the end is the piece developers forget to plan for, and it is the difference between selling the last four townhouses at a considered price and discounting them to meet a lender’s expiry date.

Worked example · illustrative

The last two townhouses

The situation: A four-dwelling project reaches practical completion on program. Two dwellings are presold and settle. Two remain unsold, and the construction facility expires in eight weeks.
The move: A residual stock loan secured against the two completed, titled dwellings repays the construction lender at expiry. It is arranged during construction rather than in the final month, so the timing is a decision instead of a scramble.
Where it lands: The remaining stock is marketed at a considered price rather than discounted to a deadline. The residual facility costs money for the months it runs, and that cost is weighed against what a rushed sale would have given away. Availability depends on titles, valuations and the lender’s view of the market at the time.

A composite example, not a specific client. Any figures are indicative and outcomes depend entirely on individual circumstances and lender assessment.

What lenders look for in the developer and the builder

Credit committees fund people as much as projects. Two identical feasibilities get different answers depending on who is delivering them.

Track record. Completed projects of similar scale and type, with evidence. A first project is fundable, but it usually needs more equity and a stronger builder.
Builder strength. Licence, insurance, financial capacity, current workload and history. Builder insolvency is the single most common way a funded project comes apart.
The contract. A fixed price contract with a defined program and liquidated damages is worth more to a lender than a cost-plus arrangement.
Planning certainty. A permit in hand with conditions understood, not an application in progress.
Equity. Real, contributed, and not itself borrowed from somewhere the lender cannot see.

Common ways a development file falls over

01The land was bought at a price the feasibility cannot carry. No lender fixes this, and it should be tested before the land contract, not after.
02The contingency is nominal. A thin contingency reads as an inexperienced feasibility and often triggers a request for more equity.
03Interest was modelled as if it were paid monthly when it is capitalised, which understates the total cost by a meaningful margin.
04Presales include related parties or one buyer taking several lots, so the qualifying count falls short at the last moment.
05GST treatment on sales was not settled, so the net realisation figure is wrong.
06The exit was assumed rather than planned. Sales take time, and the facility expiry does not care.

Run the numbers

See it with your own figures.

Indicative only. Change anything — the defaults are starting points, not quotes.

Repayment step-up · indicative$878$4,025 a month becomes $4,903

The loan

Loan amount

The amount you are borrowing, or the balance you are refinancing. The slider covers the common range — type a larger figure straight into the box.

Total loan term

The full life of the loan, including the interest-only period.

Interest-only period

How long you pay interest only before principal and interest starts.

The rates you have been quoted

Rate during the interest-only period

Assumption only. Replace it with the rate your lender has actually quoted. Interest-only is often priced above principal and interest, so set the two fields separately.

Rate after the interest-only period

Assumption only, and the same rate is used for the straight principal and interest comparison so the two structures are judged on equal terms.

Other debts to roll in

Fold other balances in and both columns are worked out on the combined loan.

Add a debt

Pick the closest type. It only sets the name — you fill in the numbers.

Repayment step-up

$878

Your repayment climbs from $4,025 to $4,903 a month the day the interest-only period ends, 5 years from settlement.

That is a rise of 22% in one month.

Monthly repayment, side by side

Interest-only$4,025

After the interest-only period$4,903

Principal and interest throughout$4,610

The honest version

Interest-only lowers what you pay now. It does not lower what the loan costs. It keeps $585 a month in your hands while it runs, and the balance sits exactly where it started. When the period ends, the same debt has to be repaid over 25 years instead of the full term. That is the step-up, and it is the part worth planning for.

Plan for the step-up, not around it

Send us the loan, the term and the interest-only period you have been offered. We will show you what the repayment looks like the month it lands, and whether the structure still earns its place in your plan.

Talk it through with a broker

The detail behind that number

Interest-only repayment: $4,025 / month
Repayment once interest-only ends: $4,903 / month
Principal and interest from day one: $4,610 / month
Balance still owing when interest-only ends: $700,000
Total interest, interest-only structure: $1,012,367
Total interest, principal and interest: $959,672
Extra interest over the life of the loan: + $52,694

Total interest over the term

Interest-only structure$1,012,367

Principal and interest throughout$959,672

What this calculator assumes

The interest-only period is genuine interest-only. Only interest is paid and the balance does not move.
When the interest-only period ends, the full balance is amortised over the remaining term at the rate you entered in the second rate field.
The straight principal and interest comparison uses that same second rate, so the two structures are compared on the rate rather than on the structure plus a rate gap.
Repayments are monthly, in arrears, and the rate holds steady for the whole term. Real rates move, and a variable loan will not behave this smoothly.
No application fees, ongoing fees, discharge fees, offset balances, redraw or extra repayments are included.
The interest-only period is capped at twelve months short of the total term so there is always time left to repay the principal.
Other debts you add are rolled into the loan, and both the interest-only and the principal and interest columns are worked out on the combined balance at the rates you entered over the same term. Payout figures, exit fees and what you pay on those debts today are not modelled.
Both rate fields are placeholders for you to overwrite. They are not rates WeL’nd is offering and they are not a quote from any lender.

Open the full calculator

FAQ

Questions people actually ask

If yours is not here, ask it. We would rather answer the awkward one early than have you find out later.

1300 015 267

How much equity do I need for a development?

Enough that the loan sits inside both the loan-to-cost and loan-to-gross-realisation limits the lender applies, whichever binds first. In practice, the land is usually the equity, and lenders expect it contributed before debt is drawn. If the land was bought too dearly, more cash is required, which is why the feasibility should be tested before you buy.

Can I get development finance with no presales?

Yes, through non-bank and private construction lenders, at a higher cost of funds. Whether that is a good trade depends on the discount you would otherwise give away to secure presales, and on the depth of your contingency. We model both so the decision is made on the net result rather than the rate.

What does a quantity surveyor do on my project?

The QS reviews your costs and program before settlement, then attends site at each progress claim to certify the work in place and confirm that the remaining facility still covers the remaining work. The lender relies on those certificates to release funds. The QS is appointed by the lender and paid by you.

Is interest paid monthly on a construction loan?

Usually not. Interest is generally capitalised into the facility during construction, because the project has no income. That means the interest line has to be included in your total development cost and funded within the limit. Underestimating it is one of the more common feasibility errors.

What is a residual stock loan?

It is a facility secured against completed, titled, unsold dwellings at the end of a project. It repays the construction lender at expiry and gives you time to sell the remaining stock at a considered price instead of discounting to a deadline. Plan for it during construction, not in the last month.

Can I fund a subdivision with no building work?

Yes. Civil works and land subdivision are fundable, assessed on the same logic: cost to complete, realisable value of the finished lots, and the exit. Titles and the timing of registration matter a great deal here, because nothing settles until the lots are registered.

What happens if my builder goes into administration?

It is disruptive and it is survivable, but it needs immediate action. The lender pauses funding, the QS reassesses cost to complete with a replacement builder, and the shortfall usually has to be covered. Builder financial strength is worth checking properly before the contract is signed, not after.

Do I need a fixed price contract?

Most lenders strongly prefer one, because it caps their exposure to cost escalation. Cost-plus and construction management arrangements are fundable with some lenders, generally with more equity, a stronger contingency and closer QS involvement. Expect the pricing to reflect the extra risk.

How long before the project starts should I speak to a broker?

Before you commit to the land. The single most valuable conversation happens when the feasibility can still change: land price, product mix, staging, and the funding structure. Once the land is bought at the wrong number, finance cannot repair it.

Can development finance fund a tax debt on my other entity?

A construction facility funds the project, not unrelated liabilities. If the group carries an ATO position, that has to be dealt with separately, usually by refinancing against property, and it will be visible to the development lender in any case. Disclose it early rather than have it found.

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