HOW DO I BUILD MY HOME?
So the houses you have been looking at don’t tick all the boxes or you just want something especially for you. It’s not surprising that you’ve decided to go down this path and potentially save on costs and benefit with a result that you love.
We’re more than happy to go on this journey with you and while the loan approval may be similar to buying an established home the process during the build is a little different. It’s important to us that you’re armed with the right knowledge upfront so that you know what to expect. With access to a plethora of construction loan options, we can assure you that we have a suitable option that will help to take the stress out of building.
A few things to be aware of upfront:
- Lenders control payments to the builder through progress payments
- Variable rate loans are typically favoured by lenders during the build
- Repayments are normally interest only during construction
- Valuations are typically required before and after build completion
We know you have lots of questions. So, we’ve provided answers to the most common ones here.
Good question. We will provide you with the specifics over the phone before we meet, but generally the banks ask for:
- Proof of income
- A deposit backed by a proven savings history
- A good credit history (we can still help if you don’t)
Most lenders ask for 5% of the property value as a deposit but you need to factor in purchase costs like stamp duty, conveyancing and the impacts of lenders mortgage insurance (LMI). In general, the more you have saved, the more options you have and the easier the approval process becomes.
We have a calculator to give you an idea but we will assess your situation and confirm this for you. Generally speaking the more money you earn and the less debt you have the more your capacity to borrow will be. Each lender will be different.
If you’re building or buying a new or substantially renovated home, you may be eligible. There are several factors at play that will determine your eligibility. See useful links section for additional information.
If you are a first home buyer the purchase price of your land will dictate whether you qualify for the stamp duty waiver or concessional rate. See our useful links and blog section section for more information.
This will vary depending on several factors including the lender you choose, the purchase price of the property, the deposit you contribute and so on. We really need to individually assess your situation to answer this.
Lenders Mortgage Insurance is a fee charged by lenders, usually when your deposit is below 20% of your property’s value. It can be a big hurdle but some lenders will add it to your loan so you don’t have to save up for it and we may be able to help you avoid this cost altogether.
It sounds a bit dry, but Loan to Value Ratio is actually the amount of money you wish to borrow in comparison to the value of your property. So, say you want to buy a house valued at $500,000 and a have a $100,000 deposit, your Loan to Value Ration would be 80%. Most lenders adjust their interest rates relative to the LVR and have specific ratios to which they lend.
Variable interest rates move, normally relative to changes in official interest rates set by the Reserve Bank of Australia. A variable rate loan is beneficial when rates are on the decline. Fixed interest rates don’t move. You can fix your rate for a particular period of time, normally between 1 and 5 years, but it’s most beneficial when rates are on the rise.