There’s something thrilling about building your very own, brand spanking new home!

Perhaps it’s the knowledge that everything will be fresh and new, or the freedom that comes with being able to design the property to suit your own tastes and lifestyle needs. Always dreamed of having a lap pool? Why not! Like the idea of a home studio? Let’s make it happen!

When building your own home, there’s a new chapter to begin, new adventures to be had and new memories to make. So, whether you’re planning on doing the building yourself, or you’re purchasing off-the-plan, talk with us now about securing the right finance!

Building your own home

When you build a new home, the right loan could potentially help you save a lot of money on interest. For example, a construction loan allows you to borrow in stages, while your home is being built. Rather than providing the full loan amount at once, the lender breaks the loan down into “progress draws”, and pays these to the builder in stages throughout the construction process. This arrangement means you only have to pay interest on the loan amount you have actually used.

Your lender will usually require council-approved plans and a fixed-price building contract before they will approve a construction loan. The lender’s valuation expert will use these to help estimate the on-completion value of the property, and the lender will then assess the final loan application on whatever is less – the land price and cost of construction, or the on-completion value.

The advantages of construction loans

With construction loans, you only pay interest on what you’ve actually drawn down, not the maximum loan amount you’ve signed up for. What’s more, loan repayments are usually interest-only during construction.

As each phase of construction is completed, the lender’s valuation expert usually inspects the building progress on behalf of the lender and then authorises the next draw down on your loan to pay to the builder. Then at the end of the construction process, you can choose the type of loan you’d like to use moving forward – this could be a fixed rate loan, a variable rate loan, or another type of loan, depending on your circumstances and objectives. (So do talk to us about your options before you decide.)

Perhaps the biggest benefit of a construction loan is the way your builder is paid. Construction loans help to give you a level of protection, because cash is not paid to the builder until the work is completed and inspected at each stage. This can often help to prevent construction falling behind schedule, or potentially aid in early detection if there are any issues with the build or the quality of work.

Some lenders charge a slightly higher interest rate for construction loans, so it pays to ask us to shop around amongst lenders. Talk to us and we’ll ensure you have the right kind of construction loan for your particular needs and are fully aware of exactly how much it will cost. If necessary, we may advise you to use another loan alternative, like setting up a line of credit facility, for example.

Buying off-the-plan

Buying off-the-plan is a term used to describe buying a home from a developer before it has been built. If you’re buying property off-the-plan, you’ll only have to pay the deposit up front. However, organising your finances may not be quite as straight forward as with purchasing an established home, as there is usually a considerable period of time between paying your deposit and final loan settlement. You will also need to get advice from a solicitor regarding the details in the contract for your off-the-plan home purchase, to make sure you and the developer are on the same page regarding what the price includes before you sign the contract.

As your mortgage broker, we are here to explain the process of buying off-the-plan, help you line up your professional team, and help you find the most suitable loan for your needs and objectives. We can also help you arrange your deposit, whether it’s in the form of a bank guarantee, deposit bond or cash, and oversee the payment process for you. It’s also very important to organise conditional loan approval (finance in principle) with your chosen lender before construction of your off-the-plan property begins, so do give us a call before you sign on the dotted line.

Talk with us about finance before you get started!

There are many important things to consider when buying off-the-plan, or building your own home. For example, once the property is built, most lenders will require a valuation on the finished product before approving your final loan and proceeding to settlement. If a problem arises, such as the value of the completed home is less than you anticipated, construction is delayed, or the build costs more than you expected, having a finance professional on your team could make all the difference to the outcome.

If you’re a first-time buyer, you may also be eligible for the First Home Owner Grant (FHOG) when building your own home or buying off-the-plan. You may qualify for stamp duty concessions or exemptions in some circumstances, even if it’s not your first home. Speak to us and we’ll help you check what concessions you may be eligible to receive.

It pays to get professional advice about your finances when building your own home, and planning ahead is the key to success. Construction loans can be complicated and the timing can be tight with off-the-plan mortgages, which is why it’s a good idea to call us for help. We’re here to give you support throughout the process and help you secure a suitable finance solution for your needs and goals, so if you’re ready to stop dreaming and make building your own home a reality, please call us today.Building a new home? How to finance it

Over the last 18 months, our hot property markets have been driving rapid increases in home values, particularly in larger markets. This has placed established properties beyond the reach of many home buyers and as a result, we have been seeing a corresponding boom in new housing construction across the country.

For the year from March 2014 to March 2015, there were 210,484 new dwelling approvals which is a healthy 11.2% increase over the previous year. And whilst the most recent figures for April this year show a slight decline in apartment approvals, there were 10,130 new house approvals which was an increase of 4.7% over the previous month.

Thinking of building a new home? Talk to us.
From these figures, it’s clear that more and more people are finding it attractive to build a new home rather than compete in today’s hot property market for an established house or apartment.

And why not? Building your own home not only has the potential to save you money, it gives you the opportunity to get the home you’ve always wanted – one that’s tailored to your personal needs and requirements with all the bells and whistles you may not be able to afford in an established home at today’s prices. New homes also help you plan your finances with confidence, with low maintenance costs and no major repair expenses in the foreseeable future.

Obviously there are some drawbacks to building a new home, compared to buying an established property. The construction process takes time and you may have to wait a while before you can move in. Additionally, if you’re building in a new housing estate, it may be some time before features like schools and shopping amenities catch up with the measure of convenience you’re currently enjoying in an established suburb.

Financing a new build is also a bit different to financing for an established home. Instead of a straight forward mortgage, you may wish to consider a Construction Loan product that can help take the hassle out of the building process.

Construction Loans – how do they work?
With a regular mortgage, you pay a deposit and the lender pays the remainder at settlement in a lump sum – it’s fairly simple and straight forward. Construction Loans differ from regular mortgage products as they pay for the project in stages, paying your builder as construction progresses through each stage – slab, roof, lock-up and completion. Additionally, Construction Loans usually last for the period of construction only.

The major benefit to a Construction Loan is that you only draw down on funds as you need them. This can mean big savings on interest as you only pay interest on the money you use at each stage. And once construction has been completed, you can often nominate which home loan product the Construction Loan will revert to, moving forward – ie. A standard variable rate loan or a fixed interest rate loan.

Another thing to take into consideration when building your own home is purchasing the land. If you purchase the land first, you will usually require a regular mortgage for the land portion of the purchase and then apply a Construction Loan to the build only. The loans can be arranged separately, but are usually bundled together, particularly with a house and land package deal you may purchase from a developer.

There are quite a few different Construction Loans on the market and each of them can be structured differently. We’re here to help you obtain the best loan product/s for your individual needs, so before you commence the process of building your own home, it’s wise to spend a little time with us to get the right financing lined up for your needs.

What else do you need to think about?
Just as with a regular home loan, you will require a deposit before you can commence building your dream home. The amount of deposit you need will vary according to the cost of the project and the lender’s requirements, so you should talk to us about how much of a deposit you will need.

Before you commence your build, you should also be very careful to establish exactly what is covered for the price, as there could be other expenses that you need to budget for. We recommend that you also have some contingency funds set by, just in case of unforeseen expenses that may not be covered by your Construction Loan.

Talk to us for more information
Building a new home may be a great idea for you and your family, depending on your personal financial situation and circumstances. If you’d like to find out more, or explore your loan options and establish your budget for a new build, why not give us a call? We’re here to help you discover if building a new home is a viable option for you and to help you get pre-approval on a suitable financing package before you begin. A short chat could help to take a lot of the hassle and uncertainty out of the process, so why not give us a call today?

Copyright 2016