FINANCE - BUILDING
can’t find the home of your dreams or want to specify exactly how your
will look, you might choose to build your own home. A
‘Building Loan’ is
simply a structured approach to paying out a home loan.
repayment only begins when the loan has been paid out in
full, it is
important to note that interim interest will be charged for amounts
progress payments from the moment the first payment is effected. These
amounts are debited to the home loan account, even though
are not due yet.
BENEFITS OF BUILDING LOANS
FOR A BUILDING LOAN
payments - normally 3 or 4, made to the builder at intervals during
construction - allowing you to pay only for the work as it is
only starts when the loan has been paid out in full.
repayment options are available ─ including debit orders, electronic
transfers, cash or cheque deposits,
salary deductions or stop orders
reputable builders, registered with the National Home Builders
Council are allowed, ensuring that your home is built according to the
standard and carries the necessary warranties.
Normal qualifying criteria applies
the stand upon which building will take place, must be within a
proclaimed suburb. Most banks now treat building loans exactly the same
as a normal home loan in terms of criteria and the percentage loan to
value they will lend.
addition. the following documentation is required
specifications (a standard bank form which needs to be signed).
- Copy of BuildingPlans.
quote or tender and Building Contract
- NHBRC Enrolment Certificate
- Waiver of
Builder’s Lien (required before first progress payment).
What is a
payment is a payment released by a bank assessor - authorised by the
to pay the builder, or another elected party that needs to be paid, at
stages of the building process for work completed. Before any payments
made, the bond must be registered in the Deeds Office. Normally, 3 or 4
‘progress payments’ are made to the builder during construction - the
usually after foundation, the second at window height, the next one at
and the last upon completion of work.
the typical payment process?
progresses, requests for payment will be submitted by the builder. You
then have to submit a progress payment request to the bank. After the
assessor has assessed the cost of the work carried out, payment will be
authorised, with consent from the customer.
assessor will calculate the amount available. The bank will only
money for work completed or materials actually used and will retain
money for completion. Material purchased that does not yet form part of
structure will not be taken into consideration when this calculation is
interest is interest charged on the outstanding balance from the date
first debit on your home loan account to the date of the
progress payment - after which date the normal
home loan repayment
Even though repayment is only
required after the final progress payment, it is
advisable to cover these costs in the interim. Interim interest can
during the construction period and, if it is not paid, a portion of the
progress payment needs to be found from other funds as the interim
will have utilised part of the loan that was granted.
details on the various costs involved in buying a property go here
- Never sign
a blank progress payment request before inspecting the house to satisfy
yourself that it has been completed to your satisfaction and per the
- Always be
careful with a final payment request, as this advance should only be
when you are satisfied with the completed dwelling. Do not sign if you
Occupation Certificate issued by the local authority will be required
the final payment being made to the builder. This will insure that the
has been inspected and all requirements by the local authority have
building/alterations are to be completed within the stipulated period
the loan agreement, failing which the bank reserves the right to
Visit the Finance Advice Centre for
all your finance answers
on the various costs involved in buying a property go Here
Go to the Buyer Section for
all your buyer answers
Remember to look through
our Step by Step Buyer
Guide and also visit our Blog
for other helpful information
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