How to build a house | mortgage broker sydney

I could not agree more!  While most will tell you that building a home is a nightmare I think it’s a dream come true and I look forwarding to building again. With Home loan comparison we show you how!

Sure, almost certainly something will go wrong, hopefully it wont be major.

Sure it’s more involved but don’t you just love selecting your favourite tiles and your perfect bench-top?  Personally I think the results are well worth it, and here’s some tips to help make the process as painless as possible.

5 Easy tips to building a new home

1 Go into it with open eyes.

Builders are, like everyone else, in the game of marketing their beautiful new home to you and enticing you away from the next guy. That means they’re going to want to look like a better finished product for less money than their neighbouring builder.

The display home is going to be a knockout and the price ridiculously small (with an asterix).

Be a bit savvy and check out what is and what is not included in the price – ask the sales reps to show you what is in the display home but not included in the price and add up your favourite features.

Are site costs included like preparation of the land and slab, and if they are not can you get a fixed price agreement on what these will be? Spending a few hundred dollars on testing at this stage (with your chosen builder) to confirm and lock in site costs is worth more than you can imagine.

Funny but true story, in a fit of excitement I paid a deposit to a builder once only to review the contract and find so many hidden costs – doors, for example, doors were extra! We at mortgage brokers Sydney can lift this burden from you.

2 Get your loan approved with a construction expert.

This seems fairly logical, it takes a lot of extra work to get construction finance approved – a bit of backwards and forwards, an experienced broker who specialises in construction loans will make the process smoother.

For most people the finance will be in two parts – a full approval to purchase your land and, unless you have already finalised your contract, a preapproval for a maximum build price.

3 Build in room for variations (in your loan and in your expectations!)

I can’t recall anyone who has not had to make some variations to the building contract – most typically it’s changes to the kitchen and electricals and this easily adds up to a price increase of  $10,000 and more. Most builders are making these changes as “post contract variations” which means that they are after contract signing, and after your loan is approved so it pays to have built in an allowance before any valuations are done. Just a tip!

Finishings are another area which, if you want them included in the loan, you should consider up front. I recommend you do a little running around with your preliminary plans and get rough quotes for carpet, tiles, landscaping, driveways, blinds or window furnishings and anything else you absolutely can’t live without. Send these in with the loan application and you may be able to borrow the money for these.

If you have a smaller deposit – or even if you’re just the cautious type, a fixed price contract is essential.

4 Check the progress payment schedule.

This sounds an odd one, and your broker will be the best to advise you on this, but, where there’s not an actual “HIA industry standard” for progress payments, there is an “adopted” standard and a common sense thought on what the builder should claim at each stage. We are seeing a few builders go outside of these averages – by a lot – and this will cause you grief with your lender.

To explain a bit more about what a progress payment schedule is, building a home means that you pay for the work as it is done in 6 broad stages, always working on the basis of keeping enough money back to finish building the home if something goes wrong with your builder.A pretty standard schedule looks like this:

DEPOSIT STAGE the builder is paid 5% of contract price

• SLAB STAGE   20%, literally when the slab is down
• FRAME STAGE 20% As it sounds, the frame is up
• ENCLOSED STAGE 15% Brickwork or external cladding is on, windows and doors are on and we are locked up
• FITOUT STAGE  25% The inside work is underway, our internal linings are up
• PRACTICAL COMPLETION 15% everything is finished except the appliances

If the schedule is very strange and your deposit is smaller, it might be best to choose another builder, lenders are cracking down on builders who want too much money in the initial stages and they may decline your loan or certainly cause you some stress, ask me about this and we’ll see what we can work out.

While we are on the subject of stages, you should know that you start paying interest on the loan as you “draw down” on each stage, so initially you’re paying interest on the land loan, then the land loan and the deposit, then the land loan, deposit and slab stage etc. Ask your broker to estimate what these repayments are and make sure you can afford them and to pay for living expenses while you’re building. Unfortunately no one can say how long you will stay on each stage but in a 6 month build contract its roughly a month per stage (slab and frame will be quicker and the final stages a smidge longer).

5 Once you’re underway, keep a rough eye on progress, an open mind, and remember you are not a builder.

A personal experience: the very first home I had built was on a battleaxe block with a pre-laid driveway and I remember a message left on my answering machine on a friday afternoon from my site supervisor telling me that he was ripping up my (40m long) driveway – at my cost – to get the electricity and sewer (services they’re called) into the home and I’d also have to pay to replace this. What!!! With a little lateral thinking and communication we were able to get a trench dug ourselves and the services in before the builder was back on site on Monday (see, even with this somewhat more major stress I am still an advocate of building!) Now this was 1997 and you were allowed on site then – not so much anymore – but now you’re also much more in contact with the site supervisor. Keep a good and open relationship with your supervisor, they are the key to a beautiful home with minimal stress!

So my advice, keep an eye out for glaring errors (umm excuse me I paid extra to have no shower hob and you’ve just bricked one in, – or, dear Mr Painter, my beautiful maple staircase which came at considerable cost was to be stained – not painted white…. both real examples) because no one is more intimate with the details of your dream home – but – don’t annoy the supervisor and remember they are professionals, they do know how the frame should go together better than us.

At the end of the day you’ll either be elated with the build or relieved that it’s over, or maybe a little of both, but trust me nothing does beat the feeling of a brand new home. So go on, book us in to get you started!