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However, the builder risks losing money if things become more expensive than expected. Builders usually manage this by having a range of previously-costed and built plans you can choose from. They may also build an allowance for some cost over-runs into the price. The good news is there are several advantages to building a new home and a range of construction contracts that help to ensure everyone is seeing the same finished home. In fact, a construction contract is required in New Zealand if you want a loan for any residential building work costing $30,000 or more.
Lenders typically want to see a floor plan with specifications, as well as quotes for all contractors and materials, before they’ll approve a mortgage. You’ll have to provide a payment schedule, and then copies of invoices to be paid, before each staged drawdown of your construction loan is approved. These contracts usually apply if you bought your land separately and are engaging a builder to construct your new house on it. You may have more freedom to customise the home to your needs, ranging from variations on a construction company’s standard plans, to hiring an architect to design the house of your dreams. You may also agree to do some of the work yourself, such as painting or landscaping. Turn key contracts for new-builds provide maximum certainty for you, the homeowner.
Back My Build variable rate (closed to new applications)
We have a wealth of genuine experience with new home building loans, having financed many homes to be built for delighted clients, and have real life experience building and renovating our own homes. Build-only contracts can offer the certainty of a fixed price, like a turn key contract, or they can include any number of estimated PC sums. Either way, it’s very important to understand what is and isn’t included in the contract, even if it has a fixed price. A good mortgage adviser can help you choose the best contract type and construction loan for your circumstances. That’s why we make it easy for you to connect with the top mortgage advisers from around the country for no charge.
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Criteria is Always Changing. Talk With The New Build Experts
New investment properties require a lower deposit than buying existing, as low as 15%. More than likely you will get a new build that is on a far smaller site or piece of land which creates the margin for a developer but the actual floor area for the home may be large. A lot of this will ultimately depend on the developer and construction company to ensure the deadline and budget is hit. Prices have gone up dramatically across New Zealand for buying existing homes that have good size land therefore new homes builds have become popular. After the fixed rate period the Housing Variable Rate will apply. When you’re building, progress payments are made to your builder in stages.
An interest only loan will cost you more interest in the long term because you're not paying off any of the principal during your interest only period. You must start paying principal and interest on the loan within 12 months of the first drawdown. During the project you only pay interest on the money already drawn down and you don't start repaying the principal itself until the project is finished⁴.
Are new builds cheaper?
This ensures you’re only paying for the work that has been done during the build. There are a few things to consider when thinking about building your own home. If you’re ready to undertake a building project, the first step is to get your finance in order.
The other advantage of turn key construction contracts is you pay a deposit at the beginning, then your construction loan repayments and mortgage interest charges don’t start until the property is completed and settled. That can give you some time to increase your savings to cover some of the initial moving-in costs, such as insurance, rates and essential furniture. Broadly speaking, a "turnkey" is a process of delivering the completed home rather than a type of loan. Most banks like to promote "turnkey" because they are not required to fund anything until the home is completed, bypassing all the work to assist in getting the home completed. But the key benefits of the turnkey process is paying a deposit (normally 10%) up front, and not starting the mortgage payments until the home is completed. This avoids the hard bit about a construction loan that requires you to pay your rent and a construction loan at the same time.
You can structure your loan so you can draw down funds to suit this schedule. When you’re approved for a home loan to build a house, you won’t have to take the entire loan out at once. By not drawing down your full loan in one go, you'll save on interest payments.
We need a registered valuation at the beginning of the project, and a registered valuer’s completion certificate when the work is finished. The valuation needs to be from an approved registered valuer using our panel valuation service - we can organise this for you. Align your repayments to suit your lifestyle, whether it's weekly, fortnightly, monthly or quarterly. Use our home loan calculator to see what your repayments could be.
I have known Sarah for a long time and we worked together once, but she now works for a major bank and so had arranged her finance for a new build with the bank she works for. But this year there’s been a sharp increase in building costs, far higher than the inflation numbers. According to the latest Cordell Construction Cost Index, the price of building an average 200m² brick and tile standalone home in the third quarter of this year rose 3.4%. That figure is up from 2.6% in the second quarter, and marks a 9.6% increase from the same period in 2021. Any loans that are documented after 8 July 2022 will not be eligible for Back My Build variable rate.
Before you get started, talk to us about your finances and which options will work for you. When it comes to loan type and repayment plans, one size doesn’t fit all. Enjoy the freedom of a revolving credit, or make budgeting easier with a fixed home loan - whatever works best for you.
With BNZ a loan approval is valid for 90-days and can be extended for another 90-days, meaning you have 180-days to have the build complete before needing to get an updated application done by your mortgage broker. If you’re looking for the cheapest personal loan, Canstar’s personal loan comparison tables can help. The table below displays the sponsored unsecured personal loan products available on Canstar’s database for a three-year loan of $10,000 in Auckland, with links to lenders’ websites. Use Canstar’s personal loan comparison selector to view a wider range of products on Canstar’s database. With so many banks in New Zealand, there are many options for building contracts and each of these banks treat their building loans differently.
In most cases, construction loan providers will require a substantial deposit and only lend based on the value of the land. Because of the risks involved in transporting and locating the home onto your section, they’ll only let you draw down the money after the house is attached to the land and connected to all services. Be sure to check how this compares to when the builder requires payment. For most people, owning a brand new home is the dream but paying rent while you are building plus paying the construction loan interest is simply unaffordable for most.
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