How Much Equity You Need to Start a FY27 Build
Equity to Start a FY27 Build | Switchboard Finance
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Second Mortgage · Equity · FY27 Build
How Much Equity You Need to Start a FY27 Build
Lenders rarely fund a build on the land alone. Before a non-bank lender releases a dollar, it wants to see how much of your own money is standing behind the project. This is a plain-English look at what counts as your equity contribution, and where a second mortgage fits a build that starts in FY27.
Quick Answer
To start a build, a non-bank lender wants to see a meaningful equity contribution from you before it funds the rest. Your equity is what you own less what you owe, and a loan to value read sets how much can sit behind your first mortgage.
How much of your own money do you need to start a build?
Most non-bank lenders want to see a genuine equity contribution before they fund a build, and they size it against the total project cost, which is indicative and varies by lender. The principle is simple: a lender shares the risk of a project, it does not carry all of it, so it wants you to have real skin in the game first. Planning a build that starts in FY27 means settling this money question early, and the Construction Hub maps the wider lanes, but this piece zooms in on one number: your contribution.
What lenders actually look at first is rarely the headline land value; it is the size and quality of the equity standing behind the build, and whether that equity is genuinely yours to use. Get that figure right at the start and the rest of the conversation moves quickly. Get it wrong, and an otherwise good project can stall before a single trade is booked.
What a lender counts as your equity contribution
What a lender counts as your money is narrower than most builders expect, and getting the sum right early saves a stalled application later. The working figure is straightforward: take the current value of a property you already own, subtract what you still owe on it, and the difference is your usable equity. Add any genuine cash you are putting in, and that combined pool is your contribution.
Lenders then apply a combined loan to value limit, illustrative and varies by lender, to decide how much they will lend against the project and how much you must fund yourself. The cleaner and more verifiable your equity, the smoother that calculation runs.
The pattern is simple: a lender counts what it can verify and hold a charge over today, and discounts or ignores anything that depends on the project succeeding first. That is why the usable figure is almost always smaller than the equity you think you have on paper, and why it pays to size your contribution before you commit to a build rather than after.
Where a second mortgage fits your contribution
A second mortgage is the most common way builders turn equity they already hold into a contribution they can use, without refinancing the loan already sitting on the property. It is registered behind your first mortgage, which is why it is often described as an equity release: you release equity that is already sitting in the property and put it into the build. That keeps your existing first loan untouched, which can be cleaner than a full refinance when you only need to free up a slice.
This is the lever the second mortgage page exists to explain, and it is worth understanding both the mechanics and the cost before you lean on it. Two siblings go deeper: one walks through how a second mortgage works, and another covers what second mortgages typically cost, indicative and varies by lender.
Plan the contribution before you plan the build
The cleanest builds are the ones where the equity question is settled before the first invoice, not after. If you are timing a project around the new financial year, the 2026-27 Federal Budget tax-reform measures are part of the FY27 backdrop worth reading, since the announced change limiting negative gearing on new residential builds is intended to start from 1 July 2027 and is still before Parliament. None of that changes the core point: a lender funds against equity it can verify today.
The part that most often trips builders up is leaving the contribution to the last minute, then discovering the usable equity is smaller than the paper figure. Map it early using the construction loan pack as a starting point, lean on plain-language construction finance terms where they help, see how the contribution fits the whole sequence in the FY27 build finance map, plan the exit with your build end debt in mind, and you walk into the build knowing what a lender will count and what you must fund yourself.
Starting a build is a balance-sheet question before it is a construction question: how much of the project are you funding, and can a lender verify it. Your contribution is the cash plus the usable equity in property you already hold, sized by a combined loan to value read that varies by lender. A second mortgage is the common way to release that equity without disturbing your first loan, and a broker can map the whole stack against your FY27 plan.
Key takeaway: Work out what a lender will actually count as your equity before you commit to a build, not after.Frequently Asked Questions
How much of your own money you need to start a build depends on the lender, but a non-bank lender typically expects a genuine equity contribution sized against total project cost, indicative and varies by lender. That contribution is your cash plus the usable equity in property you already own. A broker can map it against a second mortgage or other facility before you commit.
Using a second mortgage to fund a development is common, but it usually funds your equity contribution rather than the whole build. It is registered behind your first mortgage to release equity you already hold, which you then direct into the project alongside commercial property or development funding. Terms are indicative and vary by lender.
A lender counts your equity contribution as the cash you put in plus the verifiable equity in a property you already own, being its value less what you owe. Projected profit or the unbuilt project's end value generally does not count. A loan to value limit then sets how much sits behind your first mortgage.
Releasing equity from a home you already own can count as your contribution, provided the equity is genuinely yours and a lender can verify it. A second mortgage or refinance are the usual ways to release it without selling. How much becomes usable depends on a combined loan to value read that varies by lender.
A second mortgage is not the same as a deposit, though both can form part of what you bring to a build. A deposit is cash, while a second mortgage releases equity you already hold in a property and sits behind your first mortgage. For how the mechanics work, the second mortgage explainer walks through it.
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