Can someone tell me roughly how does it work and also what sort of documents are required? And usually under what circumstances people do construction loan instead of just topping up their existing loan?
You will need the following: 1. Copy of the DA 2. Plans 3. Executed building tender or contract You may be able to get away ordering an upfront valuation without the DA or CDC letter. The construction loan will be a separate loan. How many dwellings are you building?
Ensure that you don't over-capitalise on the build if it is an area with declining market. Otherwise you could have issues with the valuation at the end of the build and need to contribute more cash. Try and get a fixed-price contract if you can. Also have contingency funds available. These two things are most important if you have a problematic site - rock where pipes or foundations need to go, trees close to the building zone, significant slope.
