Increasingly more and more clients are looking at the option of building a new home for either investment or to live in.
The recent changes to LVR restrictions have made this more appealing as new dwellings are exempt from the rules which in some ways may make it easier to get an approval to construct a dwelling.
The other reason is because the changes to KiwiSaver subsidies.
There are two advantages here. Your KiwiSaver subsidy will be doubled if you are constructing a dwelling (making the maximum $10k per person rather than $5k) and also the maximum purchase price threshold is $50k higher than if the dwelling is existing.
Of course you need to meet the other requirements of KiwiSaver subsides to qualify for this (see recent Kiwisaver blog).
Generally speaking banks can lend up to 90% of the value (cost to complete) of a “total package”. If you have 10% deposit you will be required to have a “fixed price” contract. This is one contract that covers off everything from start to finish, including driveways, fencing etc ...
If your deposit is more substantial you may be able to have the build done on cost and invoice. This means that you will get quotes for everything and the bank will pay on invoice.
In any case the bank will require a registered valuers report of the plans of the property. This is to ensure that what you are paying for the land and dwelling combined matches up to what it is valued at.
You will pay for your construction progressively. This means that you use your own money first and when that runs out the bank will start drawing down “progress payments” against the invoices or updates on valuations, so your loan will increase according to this.
For every construction loan the banks require a number of documents – however you can look to get a pre-approval that will be conditioned on receiving these documents.
At Stephanie Murray Mortgages we aim to take the confusion out of construction finance. We will work with you from start to finish and explain everything along that way. It can sometimes be a lengthy process but it is all worth it in the end!
If you are thinking of this as an option for you contact us for a chat and we can go over your personal circumstances.
This information is general information only and must not be relied upon as legal advice. A disclosure statement is available here.