Building your own home can be a challenging and rewarding experience.
Like any sort of property, there is the ability to get a loan over the project. The banks are all open to funding build projects but, as the property goes through different stages of construction, there are different aspects of funding to consider.
One of our areas of speciality at Edge Mortgages is arranging loans for your building project.
Arranging lending for a build project can be a little more complicated than getting a mortgage over a completed property, as there is more perceived risk for the lender – given it is harder to sell a half-completed property than one that is all ready to be occupied. We help fund build projects from the largest multi-unit developments through to someone building their own dream-home for their family to live in.
There are two distinct types of residential building projects:
- “Traditional” construction
- This is where you buy (or own) the land and you have a building firm construct a home for you in stages. At each stage of the project the bank advances a certain amount of funds based on a combination of what a Valuer believes the property is worth and what the “Fixed Price Building Contract” (a contract the purchaser agrees with the building company at the beginning of the project) outlines as a cost. This can seem complicated but we’re here to help guide you through the process.
- The “Turn-Key” construction
- This is where you enter into a contract with a building company where they generally own the land in an area and are building a number of properties. You pay a 5% deposit and then don’t pay any more until the home is ready to be moved into (hence the “turn-key” description). This type of build has the advantage of the purchaser not having to pay for a mortgage through the construction period so, if you are renting or still have a home to sell, the building company is effectively absorbing the cost of the build so the borrower doesn’t have to.
In the current environment of a shortage of housing, especially in Auckland and Christchurch, we are able to arrange lending of up to 95% against a “turn-key” contract, as it is adding to the housing stock numbers. We are also able to arrange funding up to 90% against “traditional” construction.