When it comes to a new build, we can help.
Turn Key Builds/ House and land Package
New Build managed by a building company/ Construction Loan
Self-Managed Builds
Whichever type of building or construction path you are planning to take we are here to help you understand the process.
Turn Key Builds
A Turn-key build also called a house and land package are often a little more expensive than a construction loans but there are significant advantages. A Turn- key home is a finished home that is ready for you to move into once completed. You pay an initial deposit usually 10% (Will need to be negotiated if you are on a 5% FHL) Then you don’t pay anything until the build is completed and code of compliance is received.
If servicing is tight then a Turn Key build would be more appropriate because you do not have to service the build loan while you are still paying your current mortgage or rent payments.
This contract is exempt from RBNZ (Reserve Bank of NZ) rules. That means you don’t need a 20% deposit – a 10% deposit (20% for investment properties) is required for turn key contracts, and some banks may even stretch to allow 5% in special circumstances, making this an attractive option for those with good income but less savings.
Many building companies have turn-key packages on offer at a fixed price arrangement. At Dixon Mortgages we work with the top Building companies that offer great service for our clients so please get in touch if you are wanting some information.
Builds managed by a building company
A bit more work is involved in a construction loan. You will need to search for land, a Geo tech report maybe needed by the bank. Once you have found the land you will need to engage a reputable building company (We can refer one if you do not have one already) they will listen to your wants and come up with plans that suit your lifestyle and your budget.
Once your plans are designed and consented the build will be able to proceed, and you will need to begin staged payments upon completion of relevant stages such as foundations, roof on etc. This is the main difference to a turn- key build and is harder on your cashflow if your household income is a little lower.
However the total build costs are generally a little bit cheaper than a turn key as the holding costs are not incorporated by the building company (Generally at a higher % then what you are charged with a bank)
Often the bank will not pay out the final 5-10% of lending until a completion certificate and/or consent is granted.
Self-Managed Builds
Self Managed builds are similar to a build managed by a building company but you are responsible for finding your own land, design your own home and council consent. You organise all the quotes to build the house and sign up labour only contracts with builders, plumbers, electricians etc to do the work. You organise the materials, insurance during the construction and the local council inspections.
Would not recommend signing one of these contracts unless you are relatively experience in construction and contacting and how it all works
- Quotes for materials and subcontractors required up front
- Progressive drawdowns are made against invoices
- Valuations for each drawdown stage are required to ensure any cost blowouts are identified early
The bank will also include a 10% – 20% contingency as these loans almost always go over budget.
Conditions
Not only does buying off the plan require a small leap of faith, it also comes with a whole heap of other lending conditions. Here are some typical conditions to expect in a build loan approval:
- Sales and Purchase of the land (or the full purchase price if you are going with the turn-key option)
- Fixed price Master Builders contract
- Building/resource consent
- Registered valuation showing the value ‘as is’ and ‘on completion’. Depending on the bank, you may need an updated valuation at each staged payment and again on completion, or you may just need a completion certificate.