Commonwealth Bank (CBA) has announced a significant update to its construction loan policy, aiming to make homeownership more accessible for Australians.
Starting from May 24, 2025, CBA will increase the maximum loan-to-value ratio (LVR) for construction loans to 95% for properties under $6 million and 80% for those valued between $6 million and $6 million (previously capped at $5 million).
This change allows borrowers to secure construction financing with lower deposits, reducing the financial barrier to entering the property market.
Key Changes
- Lower Deposits: Under the new policy, a borrower can secure a construction loan with a deposit as low as 5% of the property’s value. For example, for a new build valued at $674,000, the required deposit would decrease from $67,474.90 (10% of the property value) to $33,732.40 (5% of the property value).
- Expanded Eligibility: The increased LVR will apply to construction loans for properties valued up to $6 million, providing more flexibility for homebuyers. This expansion is designed to help Australians build their homes sooner by reducing the upfront costs associated with construction projects.
- Prefabricated Homes: CBA has also updated its policy for prefabricated homes, allowing customers to receive progress payments before the property is established on land. This change enables borrowers to cover up to 60% of the total contract price, rather than requiring them to cover up to 90% of the initial costs themselves.
Impact on Homebuyers
These changes are part of CBA’s broader effort to support Australians in achieving their homeownership goals. By reducing the deposit requirements and expanding financing options, CBA aims to make the construction process more accessible and affordable.
This move is particularly beneficial for first-time homebuyers and those looking to build their dream homes without needing to save for large deposits.
Dr. Michael Baumann, Executive General Manager of Home Buying at CBA, emphasized that the bank is committed to helping Australians build their properties sooner. The policy updates reflect CBA’s understanding of the evolving needs of homebuyers and its commitment to providing flexible financing solutions.
As the Australian property market continues to evolve, CBA’s initiatives are expected to have a positive impact on homebuyers, especially those seeking to enter the market with lower upfront costs.
However, potential interest rate changes and broader economic conditions will continue to influence the housing sector, making it essential for borrowers to carefully consider their financial situation before taking on new debt.