What To Look Out For When Building a New Home
I thought we would take a look at the considerations when looking to buy and build a new home.
It can be complicated but is a popular option for many. The ability to choose your land, your plans and how to make it all perfect to your requirements and brand sparkly new is exciting and often comes with low-deposit options that make it work better for many
1. Ensure you are working within the Building Code
Since you’re building your own house, you are obliged to make sure that all your actions relating to the build comply with the law.
Here are a few key legal issues you need to know:
• Building a new home on an empty section can be complicated, whether you build a new house or move an existing house on the section. It requires more paperwork and legal formalities.
• You need to be aware of land use restrictions, resource consents, and district plan rules. Find out more.
• You have to review your plan and budget before you apply for a building consent. If you want to make changes after the consent is issued, you’ll need to apply for a variation and pay an additional fee.
2. House and land packages
When it comes to house and land packages, it’s the design and construction companies that do most of the hard work, taking care of everything from consents to the actual building process.
Although you get a range of build and design options offered by the developer, you still have some flexibility to personalise your home. For example, you can choose the wall colours, flooring material, and much more.
One of the biggest limitations of house and land packages is that it narrows down the choice of where you want to live because the location is chosen by the developer.
3. Building a new home from scratch
This is when you have complete control over your dream house. You buy the section, you get the building consent and you manage the project!
With the help of an architect, an interior designer and a builder, you can plan out exactly what you want and then watch your dream house become a reality.
Although this approach enables you to have all the features you want in your home, it is also the most expensive way. Expect delays and extra costs – but hey, you get to live just where you want to.
5. Financing the build of a new home
You’ll probably spend more energy in planning the finances than any other aspect of building your home.
Getting finance is no walk in the park. If someone’s lending you a huge sum of money, they’re going to want to see a full set of plans, building permits and consents, and builders’ insurance.
Top tips when trying to get lending for a new home
- Depending on the type of build, there can be regular partial drawdowns based on a valuation at each stage funding is required.
- It’s necessary that the lender release money at the right time so that the builder gets paid without delay. If they don’t, you’ll have to wait a little longer to have a new roof over your head.
- Each type of build has different requirements from the lenders.
- Banks love fixed price contracts, it allows them greater certainty over the outcome and reduces the chances of cost blowouts that they might have to help you fund.
- The bank will approve the amount stated on the fixed price contract and factor in a cost overrun to make sure you can cope with any unforeseen cost blowouts.
- They then will advance in stages against that contract so you only pay interest on what you owe along the way. Given the loan is drawn down in stages, it is always a floating-rate product that can be fixed at the end.
- Most of the time the bank will retain a small amount of the loan until the property has been issued with Code of Compliance or a Certificate of Practical Completion and will require a registered valuation.
- Banks tend to lend to a lesser degree on labour-only builds (where you buy the materials and pay on an hourly rate basis to the builder).
- Whilst labour only can save you money, it can always be prone to cost increases on the way. Certainly, this is more labour intense for the client.
- Banks require that all the quotes for materials are provided and quite often will need to be prepared by a quantity surveyor.
- Also for this type of build banks will allow for a larger cost overrun and borrower serviceability needs to be able to cover this too.
- Valuations at the start and end but also at many stages along the way are required to make sure the project is on track.
Lending on kit sets or relocatables homes
These are a specialised lend as often you need to pay out on the house or the off-site build before it’s on the land and has any sort of security value to the bank.
It’s a catch-22 that we can help you with. It pays to have a much larger deposit for the land as the new property has no security value to the bank until it is sited on the land, has services connected and is issued with a Code of Compliance.
It’s a tricky lend but one that can give the client cost savings compared to a traditional build.
So, in summary, there are lots of options when considering a new build, and not all of them are straightforward but we’re here to help.
