There’s lots of things to think about when building your own home, but the stress of sorting out your finance doesn't have to be one of them.
This super-simple guide lays out the steps you’ll go through to finance your new home.
- Determining your budget/borrowing capacity
- Assessment
- Conditional approval (more detail below)
- Building contract
- Valuation
- Formal approval (more detail below)
- Documentation
- Building commences
After assessing your loan application, we'll give you what we call "conditional approval". This says that you should be approved for a formal loan, subject to you meeting all the conditions we outline in your letter and ensuring no material changes to your build and financial position occur between conditional approval and us granting you formal approval.
We’ll arrange for an independent valuation of the land and the home you are proposing to build.
- A copy of your plans, and
- The building contract from your builder.
Once a suitable valuation has been completed, and all the conditions of the conditional approval are met, your application can move to formal approval (assuming no material changes).
It is normal practice for you to pay a small amount initially to get things started. This allows the builder to prepare your building contract, finalise your plans and obtain council approval.
The builder will need to confirm you have the money available to make your progress payments when they are due before they start building on site for you.
Building Contract schedules vary, but it normally looks something like this:
- Deposit payment – a small deposit is paid to meet the builder’s initial costs;
- Base payment – is paid after site preparation, drainage and when the concrete slab or brick base has been completed;
- Frame payment – is paid once the frame has been completed;
- Lock Up payment – is paid once the bricks, windows and doors (excluding garage doors) have been completed;
- Fit Out payment - is paid once tiling, kitchens and wall linings have been fitted, and
- Completion – is paid once the painting and finishing touches have been completed, all parties are happy with the works, and council certificates have been issued.
Your builder will issue you with an invoice that will require payment after completion of each stage of your build. These invoices need to be processed on time, to make sure work on your home is not delayed.
The typical factors that could affect the interest rate you may be offered include:
- Your Loan-to-Value ratio: generally, the lower the LVR the lower the interest rate;
- Your loan size;
- Your loan purpose (owner occupied vs investment), and
- The product features you require in your loan (i.e. offset account, redraw, fixed or variable interest rate etc).
Hot tip:
Finance clause recommendations
Have your real estate agent include a minimum of 45 days from the date of contract where title has been issued. This will ensure enough time for finance and construction documentation to be finalised and assessed. Where the title has not been issued, it should be a minimum of 30 days from the issue of title. The amount of finance should state “sufficient funds to complete purchase of land and build house.”
If you need a hand, we’re here to help.
The Bank of us team can take the stress out of financing your dream home or refinancing your existing home. If you’d like help in arranging finance for your construction loan, or have any day-to-day banking or insurance needs, please get in touch.
