Funding pre-construction costs before the build starts

Every development spends real money long before a single footing is poured. Architects draw, engineers calculate, surveyors measure, consultants write reports, and the council takes its fee. Meanwhile the land still needs insuring and the land tax still arrives.

Construction lenders typically want to see an approved, costed project before they advance anything. That leaves developers to fund the front end themselves. A loan secured on property you already own is one of the cleanest ways to do it.

What counts as a pre-construction cost?

Broadly, anything you spend between securing a site and starting the build:

Cost	Typical timing	Notes
Planning advice and feasibility	Before or just after buying the site	Sets the scope of what’s achievable
Survey and site investigations	Early	Feeds the design
Architectural design	Through the DA	Often the largest consultant fee
Engineering and specialist reports	Through the DA	Traffic, stormwater, heritage, acoustic, arborist, as required
DA or planning permit fees	At lodgement	Set by regulation or council
Holding costs	Throughout	Land tax, council and water charges, insurance
Post-approval design and certification	After approval	Detailed drawings before a construction certificate or building permit

None of this is built on, so none of it is something a construction lender can progressively fund. Yet without it, there’s no project to fund.

How does the DA process affect your cash flow?

The length of the approval process is the biggest swing factor in pre-construction costs, because holding costs run for as long as it takes.

In NSW, the state government’s DA guide breaks the process into six stages: pre-lodgement, lodging the development application, assessment, determination, getting the construction certificate and, at the end, getting the occupation certificate. DAs must be lodged online through the NSW Planning Portal. The guide says a completed application will generally include a description of the development, estimated costs, any necessary specialist reports and the required fee, and that fees are set out in the regulation and based on the estimated cost of the development.

In Victoria, the planning permit system works differently. Planning Victoria explains that in most cases the council is the responsible authority, that notice of an application may need to be given to adjoining owners and occupiers, that an applicant (and in many cases an objector) can seek a review at the Victorian Civil and Administrative Tribunal, and that a permit is always subject to a time limit.

The practical lesson in both states: requests for further information, objections and redesigns all add months, and months add holding costs. Build in a buffer.

When you have an approval timeline in mind and know what property you could offer, ask what you could borrow.

What property can secure pre-construction funding?

Any existing property you or your company or trust own can be offered, including:

• the development site itself, considered case by case as land
• your home or another residential property
• completed stock from a previous project
• a commercial or industrial building

Combining the site with another property is common, because land on its own may not support the full amount needed for a long approval period. See multiple properties as security, and if the property sits in a company or trust, company or trust-owned property explains what the lender will ask for.

There is no formal valuation required. The lender assesses the property itself, so you don’t pay for a valuer’s report or wait on one to come back.

Illustrative example: a six-townhouse DA

Illustrative: A Newcastle developer buys a large residential lot with an old house on it, planning six townhouses. The land purchase is settled, and the site carries a $700k bank loan. The developer budgets around $260k for the architect, engineers, surveyor, specialist reports, DA fees and twelve months of holding costs. Their bank won’t increase the loan until the DA is approved.

• Security: a second mortgage over the site behind the bank, plus a first mortgage over a debt-free investment unit the developer owns
• Loan: $280k, giving a small contingency over the budget
• Interest: capitalised, so no monthly repayments during assessment
• Term: 12 months
• Exit: once the DA is approved, a construction lender refinances the site and repays both the bank and the private loan, or the approved site is sold

The old house can be rented in the meantime to offset some holding costs, but the plan doesn’t rely on it.

What does the lender want to know about the project?

The loan is secured on existing property, so the lender isn’t underwriting your feasibility the way a construction lender would. It still wants to understand the plan, because the plan is the exit. Expect to be asked for:

• the site address, zoning and what you intend to build
• where the application is up to: pre-lodgement, lodged, under assessment or approved
• the consultant budget, ideally backed by written quotes
• who you expect to fund construction, or who might buy the approved site
• details of every property offered as security and what’s owing on each

Keep it short and factual. A one-page summary with the numbers usually does more than a glossy feasibility pack. The documents for a private mortgage guide lists the standard paperwork for the security side.

How is the loan repaid once approval comes through?

The exit must be clear before the loan is written. The usual options are:

1. Refinance into the construction facility. A construction lender may refinance the land as part of its facility once the project is approved, depending on its own policy.
2. Sell the approved site. Approval often makes a site saleable to a wider set of buyers.
3. Sell or refinance another property in the portfolio.
4. Business cash flow, for builder-developers with other work under way.

If the approval drifts, the right move is a longer term from the outset. Private first mortgages run for 1 to 24 months. Read the exit strategy guide for how lenders test each option.

Pricing is set on each deal’s security, LVR, term and exit, and a small assessment fee is shown on the Letter of Offer.

See if your pre-construction costs can be funded

There is no credit check to enquire, and your details go to one direct lender, our lending partner fundU, rather than being sprayed across a list. A real specialist reads the enquiry and looks at the site, the security and the approval path.

The more precise you are about what you own, what’s owing, the consultant budget and the approval timeline, the more reliable the first answer will be. Start your pre-construction funding enquiry and keep the project moving while the paperwork catches up.