Financing a duplex build (staged payments, split-title mortgages)

Duplex builds are typically financed with progress-payment loans, where the lender releases funds in stages tied to construction milestones (deposit, slab, frame, lockup, fixing, practical completion).

Interest is charged only on funds drawn, so the total interest cost is lower than a single upfront draw. This is standard for any construction loan.

For a duplex, some lenders offer a single progress-payment loan covering both dwellings under the original single title. Others require two separate loans against split titles. Discuss with your lender before signing the building contract.

The lender valuation determines how much they will lend against the duplex. Two approaches are common: as if complete (the valuer estimates the value of the completed duplex based on plans and specifications) or as is (current land value only).

As if complete valuations are used for progress-payment loans because they support drawing against the completed project value.

Loan-to-value ratios (LVR) for duplex construction typically range from 60 to 80 percent, depending on lender risk appetite and borrower profile. Investor LVRs are often lower than owner-occupier.

Get pre-approval on your specific site and design before finalising the building contract. This locks in the finance structure and avoids valuation surprises during construction.

The title split (from one to two independent titles) can be completed before, during or after construction. Each has finance implications.

Before construction: two separate loans possible from the start. Simplest finance but requires the title split to be legally completed early.

During construction: original single-title loan covers the build, with refinance to two split-title loans on completion. Allows some overlap.

After construction: single-title loan through the whole build, with title split occurring at handover. Simpler finance during construction but delays independent leverage on each dwelling.

Discuss with your lender at pre-approval which timing works best for their product suite.

Investor duplex builds (where both dwellings will be held as rental properties) have specific finance considerations.

Interest deductibility applies to investor debt but not to owner-occupier debt. The finance structure should reflect the intended use of each dwelling if they will be treated differently.

Depreciation schedules on new residential builds provide significant tax benefits for investors. A qualified quantity surveyor should prepare a depreciation schedule at practical completion.

Investor duplex lenders often have more restrictive criteria than owner-occupier lenders, including lower LVRs, higher servicing thresholds, and rental income assessment rules.

A mortgage broker experienced with duplex investor finance is worth engaging. Their fee is typically paid by the lender and they can navigate the varied product landscape more efficiently than a direct-to-lender approach.

A common Adelaide duplex strategy is to sell one dwelling on completion to reduce debt, and hold the other as either owner-occupier home or investment.

This scenario has specific finance mechanics. The sale of one dwelling releases capital that can be used to pay down the loan on the retained dwelling. Some lenders require a specific sale-and-refinance clause to allow this.

Capital gains tax may apply to the sold dwelling depending on how it was owned during construction. Consult an accountant on the CGT treatment before committing to the sell-one-hold-one strategy.

For the retained dwelling, refinance to a long-term residential mortgage typically occurs at practical completion. Rates and terms are competitive for well-designed duplex product.