For many, it is a dream to build a brand new modern home, to choose your kitchen and bathroom fit out, carpet, tiles and blinds. The options are currently to buy a "spec build", where the home is totally finished or you do a new build with a Certified or Master Builder with progressive payments as the home is constructed or a "turnkey" package where settlement is on completion, with the Code of Compliance issued, plus basic land scaping, pathways fencing and even the mail box!
Now with the Reserve Bank restrictions on low deposit loans, an increased number of clients are looking to build, as these low deposit loans are not restricted by the Reserve Bank. So rather than buying an existing home with a 20% deposit, or a rental with a 40% deposit, clients are approaching a Master Builder or Certified Builder for help with plans, consents and then they build a new home. GJ Gardener Homes, Stonewood Homes, Horncastle and Platinum Homes are some builders that existing clients have used.
As the Banks do not have the same low deposit restrictions on new home builds, clients with 10% are often successful with their applications for a low deposit construction home loan or rental investment loan.
Key requirements for these loans are strong incomes, minimal amounts owing on credit cards, HP, excellent work history and a clean credit record.
New Builds. The great news is that we still have access to 90% finance for new homes and rentals that you wish to have built with a Fixed Price Contract on a Progressive Drawdown Basis or Turn Key. Terms and conditions apply.
As a general rule all Banks insist on dealing with well known Registered Master / Certified Builders, especially with deposits of 20% or less, plus they will always require a Fixed Price Contract taking the home right through to Code of Compliance (CCC). This being sign off by the Council that all is in order. This is a great way to build a home as you know exactly what your costs will be and how much you need as a deposit and how much to borrow on your construction loan. Location is always a key factor for new builds and as a general rule banks prefer doing low deposit builds in areas closer to the main population centres.
The more deposit you have the more flexible the funding can be and we have helped some clients, who wish to try and save money by managing their own new build, constructing their home using sub contractors who each have "won" the business by providing quotes. This can be time consuming and as no one is really in charge, when things go wrong, all the sub contractors tend to blame each other. Due to the higher risks a Bank may require a much higher deposit of say 30% - 40%.
Finance for a Relocatable or Transportable Home is another request that we regularly get enquiries for. Whilst the end result can be a very well finished home with considerable equity created, they are often impossible to do on a low deposit basis. Often you need a significant deposit, again say 30% - 40%, you may even need a guarantor who owns a home, as additional security for the lender, to cover the period through to when the home is finished. A guarantor must always seek independent legal advice as they are putting their assets at risk for you plus have the ability to meet the loan repayments if you are unable to. Your construction loan must also be structured to ensure that the guarantor can be released from their responsibility as soon as possible. A relocatable or transportable home is often financed by Non Bank lenders.
Non Bank lenders may also assist with construction finance for spec homes, where you build with the intention of selling as soon as possible or, if you have bad credit or hard to prove income. If you are after more information on Non Bank Lenders visit our website www.nonbank.co.nz.
Our team have a wealth of experience, having financed many new builds, built and renovated their own homes and have many happy clients, see what Karen Carter had to say about her great build experience on our Reviews page.
If you are thinking of building we can only suggest that you spend the time required to get your finance right and make sure you understand how funds will be made available to your builder to keep him on the job!