Lending for a new-build home
Building a new home from the ground up can be exciting and scary all in one however experienced builders and mortgage advisers are on hand to walk you through the process.
Insights with Infinance by Brian Coogan
Creating new homes is favoured by the Government so incentives are in place through banks to facilitate their production with lower deposits from 10%, favourable interest rates and cash back offers.
New builds come in many forms and packages with the main ones being:
Construction loans – where you select your builder and design on your own land or house and land package with progress payments aligned with stages signed off by a building inspector such as floor down, frame up, roof on, lock up, interior fit out and final completion with a Code Compliance Certificate ( CCC ) issued.
Lenders will want to see the likes of council consents, building plans, fixed price contracts, builders’ credentials and builders’ insurance in place. Typically interest only until CCC is issued with interest applied only from each incremental drawdown, most banks have a new build package with discounted interest rates usually around 1.25% off floating rates. Allowing for typically 5% cost over-runs, some ancillary works may be completed by yourself saving you money. This way you get a custom home built to your spec with the latest in clean home and environmental standards.
Turnkey – usually the domain of developers where you lay a deposit down, choose a spec from their plans, they complete the construction and you take the keys at settlement with one drawdown at the end.
Off The Plan – where you select a spec as part of a multi-dwelling development under the one consent
Cash back offers – most banks offer a cash back offer up to 1% of the value of the loan usually with a cap ranging from $5k to $20k. You would need a mortgage of over $2m to qualify for $20k. This is paid to your account to be used as you see fit, is handy to cover the likes of lawyer’s fees or even furniture.
Partnering with an experienced mortgage adviser will ensure this is set up right, from the get-go.
For more on the above go to www.infinance.co.nz/insights
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