There’s nothing more satisfying than building your own dream home.
There are numerous benefits to building as you get to pick the land, size of the house, materials and there is something about being involved in the design and build process that gives owners a sense of achievement they wouldn’t get from buying an existing property.
No matter the size of your dream home, most lenders are willing to lend up to 80% of the value of your home upon completion. Some banks will approve lending up to 90% of the value of the home if you will be living in the home and have a Turn Key Contract which is essentially a fixed price contract.
Building a home can end up costing more than what was originally anticipated. The costs may fluctuate due to delays caused by the weather, unavailability of labour and building materials, council requirements, changes to your home plans/drawings or a number of other unforeseeable circumstances.
Because of this, all banks include 10-20% contingency as part of your home loan application above the original construction cost listed in your building contract.
Document Requirement for Construction Loans:
- House plans designed by an architect and approved by local city council
- Fixed Price Building Contract – signed by you and builder listing the exact cost of construction along with the work to be completed by builder and progress payment timelines
- Building consent approved by local city council
- Resource Consent approval granted by the local city council
- Registered valuation completed by a registered valuer the value of the property upon completion
- Builder Risk Insurance Certificate provided by the insurance company of the builder listing the Bank as interested party
- Rental Appraisal from Real Estate Agent for investment property
Organising the finance however is more complicated and involved than a straight house purchase. Trying to manage this process yourself can be stressful. Having a mortgage broker look after the process from start to finish is desirable and stress free.