How to Finance Building a New Home

Building a new home is one of the biggest financial decisions most people will make and it’s often the first hurdle that stops the dream before it begins. Between land, design, and build costs, it can be hard to know where to start when it comes to financing.

If you’re planning to build in Christchurch or the wider Canterbury region, understanding your finance options early can make the process smoother, more affordable, and far less stressful.

In this guide, we’ll take you through how new-build finance works in New Zealand, what lenders look for, and how to plan your budget so you can turn your building dream into reality with confidence.

Step 1: Understand Your Building Finance Options

Financing a new build looks a little different from buying an existing home. Instead of one lump-sum payment, most builds are funded in stages as the project progresses. The main types of finance arrangements are:

1. Construction loans (progress-payment builds)

A construction loan releases funds in stages, usually after each key milestone such as foundations, framing, and completion. You typically pay interest only on the amount drawn down, which helps keep repayments manageable while you’re still paying rent or another mortgage.

Once construction is complete, the loan is converted to a standard home loan.

2. Turn-key builds

With a turn-key build, you make a small deposit (often 10%) and the builder funds construction until handover. You then settle the balance at completion. This option can be attractive to buyers who want cost certainty and fewer moving parts, as the price is fixed up front.

3. Land + build packages

If you’ve purchased land separately, your finance may be split into two loans; one for the section and one for construction. In some cases, both can be rolled into a single package with your lender once building begins.

Each approach suits different situations, so it’s worth talking to your builder early to understand which structure best aligns with your goals, timeline, and budget.

Step 2: Work Out Your Budget and Deposit

Before approaching a lender, get a realistic picture of what your build will cost. Beyond the house price itself, factor in:

• Land purchase (including site works and connections)

• Professional fees such as architects, engineers, consents

• Interior finishes and landscaping

• Contingencies for unforeseen costs (typically 10–15%)
  

Most lenders will expect at least a 10–20% deposit of the total land + build cost, though requirements vary depending on your situation and whether it’s an owner-occupied or investment build.

A good builder will provide a fixed-price contract where possible, helping you present a clear budget to your lender and avoid surprises later.

Step 3: How Construction Loans Work

If you opt for a construction loan, it’s helpful to understand how payments are structured.

Progress payments are typically released in five or six stages. For example:

1. Deposit / land settlement

2. Foundation or base stage

3. Framing stage

4. Enclosed stage (roof and exterior)

5. Interior completion

6. Practical completion / final payment
   

Your lender will often require a registered valuer to confirm each stage is complete before releasing funds. During construction, you’ll only pay interest on the amount drawn down - not the total loan - which keeps costs down.

Once the build is finished, the loan converts to a standard principal-and-interest mortgage.

Step 4: Alternative Ways to Finance a Build

If a traditional construction loan doesn’t fit your circumstances, there are other ways to fund your build:

Use existing home equity

If you already own property, you may be able to leverage the equity to help fund your new build. This can reduce your need for a separate deposit.

Bridge finance

For those selling an existing home while building, a bridging loan can help cover the overlap period until your sale settles.

KiwiSaver withdrawals and First Home Loan

First-home buyers may be eligible to withdraw KiwiSaver savings or apply for a Kainga Ora First Home Loan.

Step 5: Preparing for Loan Approval

Once you’ve chosen your preferred approach, your lender will need detailed documentation before approving your construction loan. Typically, you’ll be asked for:

• Signed building contract (preferably fixed-price)

• Building consent and plans

• Registered valuation and cost breakdown

• Proof of deposit or equity

• Evidence of income and overall affordability
  

Having your builder supply clear, itemised costings can make this process far smoother and faster. At JC Construction, we work closely with clients to ensure documentation is lender-ready before they submit an application.

Step 6: Managing Your Finances During the Build

Even with a clear budget, construction projects can uncover hidden costs from site-specific challenges to material price changes. A few tips to stay financially on track:

• Maintain a buffer: keep 10–15% aside for contingencies.

• Track progress payments carefully: ensure lender drawdowns match actual work completed.

• Communicate regularly: your builder should provide progress updates and transparency around costs.

• Avoid over-capitalising: keep your budget aligned with the value of similar homes in your chosen suburb.
  

For more insights, read our guide The Complete Guide to Building a New Home.

Step 7: Transitioning to a Standard Home Loan After Completion

Once your new home is complete, the construction loan will usually roll over into a standard mortgage. This is the point where repayments switch from interest-only to principal + interest.

It’s also a good time to review your loan structure, repayment frequency, and fixed vs variable interest options. Lenders often revalue the finished home, which may open opportunities to adjust your mortgage terms or consolidate other debts.

Step 8: Building in Christchurch - Local Considerations

Christchurch’s housing market continues to evolve, with new subdivisions expanding across Rolleston, Halswell, Waimakariri, and Selwyn.

Building new offers several advantages here:

• Modern, efficient designs: new homes are built to today’s energy standards.

• Lower maintenance: new builds reduce repair and compliance costs.

• Customisation: you can tailor layouts and finishes to your lifestyle.

• Growth potential: many Canterbury suburbs are seeing strong infrastructure investment and rising demand.

If you’re still exploring where to build, check out our article Best Suburbs in Christchurch to Build Your New Home

Step 9: Bringing It All Together

Financing a new home build can feel daunting at first, but once you understand how the process works, it becomes much more manageable. Whether you’re a first-home buyer using KiwiSaver, a family upgrading to a larger space, or an investor creating something new, the key is preparation; understanding your options, having the right team around you, and planning ahead.

At JC Construction, we guide clients through every step of the build from concept and consent to completion, helping ensure your financial planning and construction process stay aligned.

Ready to start building your future? Talk to the JC Construction team about your new build home ambitions today.