How Do I Finance My New Home Build?
I am sitting here with my client, who has asked me if I know much about financing a new home build. I then thought I would write a post, to explain in more detail how the finance process actually works for new built home, and share that the process is not all that hard when you choose the right team.
Most people think it is a nerve-racking experience building a new home from scratch. From my research, it seems that the most important thing before doing anything is to get a 12-month pre-approval finance loan from the bank. This will give you the time to find the section to build your house on and the time to organise and build your home. Next, you need to choose the right team to build and project manage your home. This is the crucial key to feeling less stressed when building your new home. Pharaoh Construction can project manage your new home build and at Pharaoh Construction we have a 5 Star Guarantee that will give you the peace of mind that all the work will be completed to an excellent standard and completed on time, within your budget.
Now, let’s look into what steps you need to take to get your new home build bank finance pre-approved.
How Much Can You Borrow?
When you take out a bank loan for a new home build, the amount you can borrow depends on your particular situation and the amount of deposit you have saved to go towards the new home build. If you already own a home and have other assets, this will be taken into account also. To find out how much you can borrow, you need to contact your bank and make an appointment with them, so they can cover all options with you. If you think you do not qualify make an appointment anyway because there are special grants available for first-home buyers that you may be eligible for and also the bank can point you in the right direction and get you organised, so that in the future, you are ready to build your new dream home.
Do I Need a Lawyer?
You definitely need a lawyer to assist you in completing your due diligence on the land you purchase to build your new house on. There may be unpaid levies by the land developer, infrastructure levies or water levies etc that are outstanding. You need to make sure these costs are not passed on to you for payment unless agreed upon.
Your lawyer will also check the building contract for any provisions that your property will be subject too, when building a new home. You need to understand what building restrictions and covenants are subject to the land you purchase, as it may restrict what you can build and the price of the property, you are required to build on the land you purchase. These details need to be passed on to your designer and builder.
How to Plan the New Home Build?
Now that you have purchased the section, you are ready to get started with planning your home build. Building a home is an exciting process. It is an opportunity for you to build your ideal living space. To do this you need to find a Designer. There are two types of designers; Architects and Architectural Designers. A full list of registered Designers can be found at www.adnz.org.nz.
You now need to consider how you will manage this project. You may decide to manage the project yourself along with the builder or to get a professional such as the designer or a registered quantity surveyor to complete your new home built on your behalf.
How Much Will It Cost?
How long is a piece of string?
There are thousands of options you will need to choose from when designing your dream home. Each option has a different cost and degree of difficulty to create. There are a number of companies that offer square meter rates for new homes, however, these are usually pre-designed run-of-the-mill homes, not custom-designed homes.
At Pharaoh Construction we can provide estimated budgets and fixed pricing for your dream home. Whether you only have ideas, concept plans or full design plans, we are happy to discuss estimates and pricing of your new dream home. However, be aware that the more information you provide us, including the materials and products you would like to build with, the more accurate your quote/estimate will be. It is also a good idea to allow a 5-10% contingency sum for unforeseen costs and changes to your plans. Please contact us if you would like a quote/estimate.
How Do I Get Insurance for a New Build?
You need to get insurance before any work begins. You need to apply for contract works insurance to protect the building site in case something goes wrong. Most insurance companies do this type of insurance. Banks will usually not lend you the money to build your new home unless you have Contracts Works insurance. At Pharaoh Construction we have our own public liability insurance, which usually covers accidental third-party damage or injury.
What Is the Building Contract?
A building contract is a contract between yourself and the building company. A building contract is required for any project costing $30,000 including GST or more. It is to be signed by both parties prior to work starting on site. This contract ensures everyone is clear about what has been agreed upon and what happens if things don’t go to plan. Your lawyer needs to also view this contract before any work commences.
How Does the Finance Process Work?
A construction loan is paid in agreed stages. Your builder may make a plan and arrange how much money is paid at each stage of the build. The building will need to be inspected and certified at each stage, to confirm the work has been completed.
The interest is only charged on the money already paid out. This keeps payments low especially if you still have to pay other living costs. Construction loans are usually calculated on a banks floating interest rate.
If you require further information about the lending side of things, please contact your bank.
How Do I Obtain a Building Consent?
A building consent from the local council needs to be applied for before any building work commences. Depending on what you are proposing to build, you may also need Resource Consent. Your Designer will be able to assist with this application.
How Do I Manage the Building Project Budget?
At Pharaoh Construction we use a project management system Buildertrend, that is specific to new home builds, so that we can ensure every detail is exactly what you had planned as well as managed on time and therefore on budget. After all, nothing will lessen the enjoyment of this process more than if costs start to run high. Of course, with any build, there can be unforeseen circumstances or even changes that you may wish to make. Any variations will be priced up and accepted prior to starting the work on any of these changes. This way you will know how much it will cost and there will be no surprises. Ultimately it is your responsibility to keep a record of all invoices, variation payments and all correspondence including all emails and texts.
Do I Get a Guarantee?
Yes! With Pharaoh Construction, you will receive the best new home build guarantee around so you can feel comfortable that the job will be done right. We will maintain constant communication with you throughout the build so you are not left in the dark. We will also ensure your home is built on time and to the agreed budget. Our ‘287 Point Quality Control Checklist’ will be used as an internal quality check, and on top of this our team will be respectful and treat your home like our own. You will also be eligible to apply for a Built-in 10 Year Builders Guarantee for further peace of mind.
What Happens When the Work Is Finished?
Pharaoh Construction will leave the site tidy and clean. They will make sure the final council inspection is completed and will ensure the final code of compliance is applied. You are now ready to move into your new home.