New build - Mortgage or Cash buyer - Protection

Touchingcloth · Feb 01, 2007 8:00 am

Hi all,

I have a theory...which is begging to be have hole put in it! It is as follows:-

If you are about to embark on the build of a project home and are going to pay with cash (i.e have the money in the bank), you will be less protected from bad workmanship etc, than if you took out a home loan to build.

This is because a bank would want to protect their investment before making funds for progress payments available. i.e they would want' to make sure that the work is being done to protect their loan.

If you're a cash buyer...then the project builder would know that they would only be up against you, and therefore may 'play games'.

What do you think?

TC

sneakersss · Feb 01, 2007 8:44 am

Hmmm...good food for thought.

But does the average person/couple/family have that kind of money laying around?

Adrian B · Feb 02, 2007 9:58 am

If you do have the cash, debit / credit card the entire process (provided you are good with cash, budgetting etc). My boss, his wife and 3 kids are off to the USa thanks to mileage / spend points. make sure you get a card that will give you the best benefit on this.

Adrian B

Bradek · Feb 02, 2007 11:36 am

Hi TC,

i think the advantage of going through the bank is that it formalizes the stages with the client confirming in writting that the stage is completed and signing off on the payment. we have built once with bank and once cash and can confirm the builders do try to rush through payments more quickly if your a cash buyer. at the end of the day though the bank is only interested in a signature from you to pay and wont help or be of any assistance if your unhappy with anything in the stage completion and in my opinion wont give any extra leverage against the builder.

Bud977 · Feb 02, 2007 11:53 am

The other interesting result is that, according to the NSW Fair Trading Contract, an individual must pay the builder within 5 days of a progress claim.

UNLESS the funds are coming from a financial institution. Then, their normal payment terms apply eg. 30 days from end of the month. This gives you much more time to look over the workmanship and amount of the claim.