Building a home is an amazing adventure in its own right. The joy of choosing your ideal layout, finishes and personal touches is only the start of why thousands of kiwis choose to build their home every year.
The peace of mind that comes from having modern materials built to high standards means you can have several restful nights without worry.
Deciding to build a home is the very first step in a long journey involving a lot of meetings, people and the occasional compromise. Getting a mortgage is one of the most important pieces of the puzzle but it may be easier than you thought.
In this month’s post we look at 9 things you need to know if you’re thinking of building a home.
IT MAY BE EASIER FOR YOU TO GET A MORTGAGE
Even with a small deposit! Banks have restrictions in place that limit the amount of people they can lend more than 80% mortgages to. This means you’d need a 20% deposit or more once these limits have been met. Building a new home is exempt from these current Reserve Bank rules, which means that the banks can lend to customers borrowing more than 80% more freely without abiding to these rules which is especially great for first home buyers.
YOU HAVE A FRIENDLY, FREE ADVISOR ON HAND
You should get your mortgage broker involved as early as possible. It is a long process and it’s best to work out what you can borrow before you even start the search for land and a design. The timeframes are much more stretched out than if you are purchasing an existing home so you need to have confidence in the person who is organising your finance. You will be speaking to them a lot so it’s best you have a great relationship with them.
YOU WILL PAY LESS IN THE BEGINNING
Build mortgages are structured so you will only be paying interest or loan repayments on the amount you have currently drawn down. Instead of having the entire amount of your mortgage released straight away build mortgages are released in stages. Your lending will be advanced progressively on invoice from the builder, which means you only begin accruing interest and paying for the amount that has been released. This will make things more affordable while you are perhaps renting elsewhere.
YOU MIGHT BE ABLE TO BORROW MORE
It is possible to borrow up to 90% of the total land value and build. The build will have to be on a fixed price contract from your builder but this means you could potentially borrow a little more. Great news if you want to make a slight upgrade to an area of your house design.
DIFFERENT MORTGAGE RULES APPLY TO YOU
Banks have different lending policies for building loans. This can depend on a number of things such as whether the land has services, what type of contract your builder has, whether they are master builders and the list goes on. This is why it is so important to talk to your Mortgage Broker who can work out which bank is best for you.
CASH IS STILL KING
Your interest rate and the cash contribution you receive is still very important when you're looking for a new build mortgage. Your Mortgage Broker will make sure you are getting the best deal to save you money. This may mean a discount on the floating rate you are paying while the loan is drawing down progressively. Your mortgage advisor will be able to explain this in more detail even early in the process.
WE'VE WALKED THE WALK
We have built a house too! – a number of times. Many of our Mortgage Brokers at Stephanie Murray Mortgages have built their own homes which means we understand what it is like to be on the other side of the transaction. We have walked in the your shoes and can offer advice that only comes from people that have experienced it themselves.
DON'T FORGET THE EXTRAS
You will be able to borrow money for landscaping, curtains and all the extra bits if it is included in the contract you have with your builder. In some cases you will even be able to borrow a little more to furnish your new home! Don't miss out on getting some essential extras by not chatting to your mortgage broker early.
MORE THAN A MORTGAGE
We will be able to understand your builder's contracts. At Stephanie Murray Mortgages our Mortgage Brokers have dealt with many building companies with varying contracts and know what generally needs to be paid when and can take the hassle out of organising this with the bank.
This information is general information only and must not be relied upon as legal advice. A disclosure statement is available here.