Building the home of your dreams can seem like a daunting process. Our professional mortgage advisers are experts in simplifying the entire process while helping you find the right construction loan for your new build.
The amount you can borrow on a new build construction loan depends on the type of building contract. Banks are harsher in their assessment of construction lending than a standard home loan for an established property. They often require applicants to demonstrate greater affordability in the bank servicing calculators or the inclusion of a percentage of the build/contract price as a cost overrun. While lender assessment of this type of lending is stricter, this varies with the type of construction lending.
If you’re unsure of how much you could potentially borrow or would like to explore the different building loan options available, you should get in touch with the friendly team at Personalised Mortgages. With our decades of experience and established relationships with lenders across New Zealand, we’ll help you secure the right construction loan for your requirements at a competitive interest rate. Best of all, our services are usually free, so get in touch with one our expert mortgage advisers today.
Buying Off Plan
Buying off plan refers to buying a property before construction has started, usually with only artist impressions and technical plans as a reference towards what the completed project will look like. One of the primary advantages of buying off plan is that you pay only the 10% deposit upon signing the contract, but do not have to settle the remaining 90% until construction is completed.
Turn Key Contracts
Turn Key contracts are fixed price contracts between you and the builder for the completion of your property, often including things such as landscaping and driveways. These contacts only allow for minimal non-fixed costs, meaning that you won’t end up paying for large additional costs once construction is underway. Turn key contracts typically only require a 10% deposit, with some lenders going down to only a 5% deposit as part of the Kianga Ora First Home Loans scheme, which you can learn more about here.
One of the most significant advantages of turn key contracts is that until the property has been completed and settled, you won’t be required to make any loan repayments or pay any interest.
Build Only Contracts
This is similar to a turn key fixed price contract with a builder. The primary difference is that the home owner is responsible for completing some finishing work on the property themselves, or may have separate contracts with other service providers in place.
Land and Build Contracts
Land and build contracts are similar to turn key fixed price contracts, and are currently the most common type of construction loan in New Zealand. Like turn key contracts, land and build contracts typically only require a 10% deposit.
The primary difference with land and build contracts is the requirement for the home buyer to pay progress payments at various stages of the project, with the first payment typically made at settlement for the land. Any subsequent drawdowns will need to be applied for with the provision of quotes/invoices. When we receive these, we will send onto the bank to process, making the payment to your nominated bank account or that of the contractor/business.
Labour Only/Partial Contracts
A labour only, or partial contract involves the homeowner or a project manager employed by the home owner, managing sub-contracts contractors, often utilising a labour only arrangement. Lending for a labour only or partial contract is typically limited to the land value only, with loan-to-value (LVR) ratios commonly sitting between 65% – 80% depending on the contract. Because labour only and partial contracts often go over budget, most lenders also include a 10% – 20% contingency.
Our highly experienced mortgage advisors have built strong relationships with over 20 of New Zealand’s leading lenders. These relationships allow us the flexibility to choose from a wide range of construction loans that offer competitive rates and are best suited to the unique circumstances of your building project.
In New Zealand a new build refers to a property that is currently under construction or has been built and had a title issued within 6 months of completion. New builds include townhouses, apartments and free-standing homes which can be built off the plans or via a fixed-price contract.
A standard Construction loan is structured on a floating/variable rate, with interest only payments for the duration of the construction period. The loan can then be fixed in its entirety once the final progress payment/ construction invoice has been paid.
Construction loans are offered by all major banks in New Zealand as well as by specialised construction lenders. It is often worth talking to a professional mortgage adviser who can help in explaining the construction loan process, and in finding the right type of loan for your project.
Depending on the type of construction contract, for most new-build homes a 20% deposit is not required. If you're building an owner-occupied dwelling, a 10% deposit loan is common, and in some cases, such as for first home buyers, only a 5% deposit may be required.