Commonwealth Bank will make it easier for Aussies looking to build their own home to get onto the property ladder with a smaller deposit. The country’s biggest bank will increase the maximum loan-to-value ratio (LVR) for its construction loans later this month.

CBA currently allows customers to borrow up to 90 per cent for securities valued under $3 million and up to 75 per cent for those valued between $3 million and $5 million. From May 24, the major bank will increase the maximum LVR to 95 and 80 per cent respectively for construction loans, while raising the maximum security for the top bracket to $6 million.

CBA executive general manager home buying Dr Michael Baumann told Yahoo Finance the major bank was committed to helping Australians realise their property ownership goals.

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“Our expanded construction loan policy is designed to create more opportunities for Australians interested in building their property to achieve homeownership sooner by allowing them to access construction finance with lower deposits,” he said.

The average construction loan in Australia was $674,649 for new builds in the December quarter, according to Australian Bureau of Statistics data.

Under the previous rules, a 10 per cent deposit would have been $67,474.90.

Now the requirement for a 5 per cent deposit halves that deposit amount to $33,732.40.

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CBA tweaks home loan policies

CBA has made a range of changes to its home loan rules in recent months, including offering loans for prefabricated home builds.

Prefab homes are constructed off-site, mostly in a factory, and then transported to the individual’s desired location, making them a cheaper option than traditional housing.

“Prefabricated homes have historically been difficult to finance in Australia,” Baumann told Yahoo Finance.

“Our prefab housing policy update allows customers to access progress payments before the property is affixed to land (up to 60 per cent of the total contract price), instead of requiring them to fund up to 90 per cent of the upfront costs themselves as has previously been the case.”

CBA has also announced it will remove HECS loans during serviceability assessments if the debt will be repaid within 12 months.

Other changes include allowing first-home buyers to rent out a room and use the rental income to help service their home loan. Customers can count up to $150 per week in servicing, with one renter allowed.