HOUSE & LAND PACKAGES – WHAT ARE THEY?
There are a wide variety of different types of ‘House & Land Packages’ for homebuyers to consider, but in broad terms they are more commonly defined by:
- Buying a section from a developer and having them build a house on it for you, or
- Having a franchise building company purchase a section and building one of their designed homes on it for you
HOW DO THEY WORK?
Typically you’d approach either a land developer of a franchise building company to outline your budget and preferred location – often in a new subdivision. They will either identify or source an available section for you within your price range.
Next, you’ll look through some of their standard design plans for a new house. The cost of construction for these is already known, and they can also ‘customise’ these designs to suit your particular needs. Because the ‘House & Land Package' is being coordinated through one builder, they’ll attend to all geo-tech tests to ensure your preferred house will fit perfectly on your chosen section. With all costs predetermined within your specific budget, you’d then sign a House & Land contract to get things going. In many cases, a $2,000 payment for the house plans (which comes off the price) is enough to start the process, and further progressive payments are typically geared toward the end of the building process.
WHY SHOULD I CONSIDER THIS OPTION?
Building a brand-new home is often a very attractive option for first home buyers to consider for a number of reasons:
- Entering into a House & Land Package with a builder often avoids real estate fees for the vendor (seller of the property) – so part of this saving could be passed onto you
- The land can often be sourced directly from a developer before it hits the market
- All costs associated with the project are known in advance with construction on a ‘Fixed Price’ basis - no cost overruns for you to worry about
- Many of the progressive payments are geared toward the end of the building process, so this is likely to have a positive impact on your budget if paying rent in the meantime
- Typically backed up with a Master Builder’s Guarantee for quality of workmanship
- Peace of mind knowing that your selected house will fit on your section and be fully compliant from the outset, with no unexpected costs (ie: unknown foundation work)
- Building a new home often enables you to qualify for more grants and subsidies
- You end up with the exact home you want – the only compromise is your budget!
CAN I USE MY KIWISAVER BALANCE?
If you’ve been making payments to your Kiwisaver account, you are eligible to withdraw after 3 years of continuous contributions. You can withdraw all savings minus the original $1,000 Government contribution. At this stage, you may only withdraw your Kiwisaver balance for your ‘First Home’ so that excludes investment/rental properties at present. In some cases, you might also qualify for a ‘second chance’ withdrawal but it’s probably best to chat with one of our friendly Advisors to see if this applies to you.
COULD A KIWISAVER SUBSIDY HELP?
This is a grant that is separate to what you have saved in your personal Kiwisaver account. The amount depends on how long you have contributed to Kiwisaver, with a maximum of $10,000 …
ie:
3 years is $3,000 for an existing home, or $ 6,000 for a new build
4 years is $4,000 for an existing home, or $ 8,000 for a new build
5 years is $5,000 for an existing home, or $10,000 for a new build
There are a number of qualifying conditions that must be met to be eligible for these subsidies including an Income cap of $130,000 combined or $85,000 for an individual; purchase price caps apply in every area; and the property being purchased must be your ‘First Home’ that will be occupied by you.
FIRST HOME LOANS
These were formerly called ‘Welcome Home Loans’ and are available through selected banks and other lenders. They are now under-written by Kainga Ora. These allow the lender to provide loans that would otherwise sit outside their lending standards.
- Are you eligible?
- How to apply?
- List of participating Lenders
The team at SMM have helped dozens of first home buyers into properties using these targeted loans, so if you’d like more information just book a FREE chat with one of our friendly team.
ARE HOUSE & LAND PACKAGES A BETTER OPTION?
The government is very keen to encourage more housing stock in the market following the collapse of the original Kiwibuild scheme in 2019. To assist in this objective, additional incentives are available to first home buyers who wish to build a new dwelling.
New builds are exempt from many of the Reserve Bank’s LVR (loan to value ratio) restrictions placed on major lenders. This can make it far easier to get 90% of the property’s final value approved for your mortgage – 80% to purchase the land upfront and then 90% upon invoice for progressive drawdowns. Once again, there are purchase price thresholds for every region and you could also be eligible for double the subsidy/grants available.
This option is not as scary and confusing as you may think, and we’re finding more and more first home buyers who are choosing to build via a House & Land package rather than a seemingly endless search for an existing property within their price range.
SUMMARY
The option of ‘House & Land’ packages takes many of the inherent risks of building a new home away, essentially because all of the costs are known upfront. You know the cost of your preferred section and the cost of construction well in advance. In a nutshell, there are no unexpected surprises throughout the entire building process, and you’re typically dealing with one builder from start to finish.
You move into a beautiful brand-new home designed for your specific needs. There are so many options available to first home buyers right now, and we think this option is one of the most under-rated of them all.
Our friendly team of Mortgage Advisors at SMM are presenting a “Summer Seminar Series” at various locations around the country specifically for First Home Buyers. You can register your interest by clicking HERE or better still, book a FREE chat with one of our Advisors closest to you.