Home Loans, Mortgages for your house building project

House construction finance is best handled through a Mortgage Broker as each bank or lender (lender) has its own ways of doing things and differing requirements for which the Mortgage Broker will be aware of.

Our approach is usually to put together the common basics then work in partnership with the lender and the client through the list of loan conditions that are likely to be unique to each lender.

There are three types of house construction finance

1. Fixed Price contract  (eg Golden Homes, GJ Gardner etc)
2. Fixed Price contact incl of land (House & Land package eg Fletcher Residential homes etc.)
3. Self build

Most lenders prefer option Fixed Price contracts (1 & 2) to Self builds, as Fixed Price Contracts minimise any impact of cost overruns that are inherent in Self builds.

For Fixed Price Contract housing construction finance, some lenders will go to 90%. 

1. Fixed price contracts on existing land usually have progressive draw downs (usually 4 or 5 progress stages - depending on contract.)  Some lenders seek Valuations to co-incide with each progress payment, others do not. For loan purposes, generally, lenders will ask for:  

(a) Copy of Building Contract
(b) Registered Valuation to show as is (un-improved value) and as completed value.
(c) Copy of Builders' Risk Insurance (unless provided for within body of Fixed Price Contract.)
(d) Copy of Building/resource consents (some lenders only - not all. The Mortgage Broker will advise.)
(e) Copy of Code of Compliance (prior to settlement)

The Mortgage Broker will coordinate all of the above and advise the client of lenders requirements here.

2. Fixed Price Contracts with Land packages often have one initial upfront deposit (made by the client) with the full balance on completion of the house, ie the loan is advanced in one lump to purchase the house on completion. For loan purposes, generally, lenders will ask for items (a) – (e) above. The Mortgage Broker will coordinate all of the above and advise the client of lenders requirements here.

3. For Self Build construction finance
For loan purposes, generally lenders will ask for:

• Copies of all quotes and estimates to cover all elements of the construction, ie Timber, Electrical, Kitchen, Bathroom(s), Roofing, Foundations, Site works, Plumbing, Gibing, fittings, labour, carpet.
• Registered Valuation to show as is (un-improved value) and as completed value.
• Copy of Builders' Risk Insurance.
• Copy of Building/resource consents

Lenders may go to 80% (some are less until the house is at “closed in” stage.)  Loans are progressively advanced against interim/progress valuations at no more than 80% of the current “as completed” value of the house at any stage.  A final draw down is provided against a Final Valuation to confirm the house is fully complete and a Code of Compliance certificate provided.

Self Builds do not suit purchasers with low equity or resources as there is a greater danger of becoming under capitalised, where after spending funds on construction there is no corresponding increase in the value of the house for the lender to lend on to complete the project.

For more information call or visit the Approved website.