Browse Forums Building A New House 1 Jan 18, 2009 2:08 pm Dear all,
I'm trying to finalise the builders in the next few days, so I want to get this concept right? There are a few things I would like to pay others to do rather than the builders to cut down the "middle man cost" ~ Things I would like to put under allowance include: - Evaporative cooling (~ $5000) - Landscaping (~$5000) - Timber Decking for Alfresco (~ $3000) - Fencing (1/2 Share) (~ $3000) - Letter Box / Antenna / Clothesline (~$1000) - Windows Furnishings ($7500 for 25sq house) The total of these allowance would easily exceed $25,000 ~ How could I put this in the house/land contract? And will the bank finalise the payment to the builders so that they could issue me a cheque when they hand over the house to me, then I could pay others to "complete" the house? Some builders said the evaluator from the bank might not finalise the full amount of loan if the house is not 100% completed (i.e they need to see the landscaped gargen, evaporative coolers, windows furnishings as suggested in the allowance items). But if the bank doesn't give the money to the builder, then I won't have the money to get those things done, so it's kind of confusing to me how does it work. Especially the builders said they won't allow any other trademen to do any job while the house is still under construction, so how could I make this work? Thank you for sharing your experience and way to deal with this? Re: How does allowances work? 2Jan 18, 2009 2:25 pm Talk to your bank. They're the only ones who can tell you how they will fund extras.... it can vary from one bank to another, and also from one customer to another. If you're a long-term customer borrowing a small percentage of the property value, they might just give you the cash and let you do what you like with it. If you're borrowing 95% and buying your first home, they're probably going to be keeping a closer eye on things.
You can get quotes off the plan, before construction even begins - the amounts will be approximate for some items though, as a physical measure-up is required for things like decking and floor and window coverings. The builder will usually allow your trades to come in and measure up when the house is getting close to completion, and then they'd be able to give you a firm quote and you could book them in to do the work straight after handover. Re: How does allowances work? 3Jan 18, 2009 2:36 pm kek Talk to your bank. They're the only ones who can tell you how they will fund extras.... it can vary from one bank to another, and also from one customer to another. If you're a long-term customer borrowing a small percentage of the property value, they might just give you the cash and let you do what you like with it. If you're borrowing 95% and buying your first home, they're probably going to be keeping a closer eye on things. You can get quotes off the plan, before construction even begins - the amounts will be approximate for some items though, as a physical measure-up is required for things like decking and floor and window coverings. The builder will usually allow your trades to come in and measure up when the house is getting close to completion, and then they'd be able to give you a firm quote and you could book them in to do the work straight after handover. Yes, I am borrowing 95% and I am a First Home Buyer, but I have been their client for the last 8 years (CBA). I'll chat with my mortgage broker tomorrow to get more details as he told me he is not meant to give me the paper of that pre-approval, so I am not quite clear about the actual conditions Re: How does allowances work? 4Jan 18, 2009 6:53 pm wallacetai I would like to pay others to do rather than the builders to cut down the "middle man cost" ~ hese allowance would easily exceed $25,000 ~ Our bank initially wanted to see written quotes for the work we were organising. I presume this was to ensure the loan was for legitimate 'house' purposes. However, I then said there may be unforseen items that we may wish to add. They then worked out how much they were happy to loan to us based on our financial situation and basically approved another few thousand on top of the grand total. During the contruction we fax invoices from the builder for progress payments or items that we have completed and pay them directly. Alternatively we forward the receipts of items we have paid for in cash and the bank reimburses us and adds that to the loan. Re: How does allowances work? 5Jan 19, 2009 8:49 am Quote: Letter Box / Antenna / Clothesline (~$3000) I don't know the answer to your banking question but this is an extremely generous allowance for these 3 things - each would cost a few hundred each - the letterbox possibly less. But I guess it is better to over budget and have spare money if you don't use all your allowance Re: How does allowances work? 6Jan 19, 2009 12:37 pm I have just ring Commonwealth Bank, and they insist that EVERYTHING MUST BE in ONE CONTRACT ~ And if it is not there, they won't fund it ~
It's kind of silly to me, because even if the builder is happy to do it (with extra $$$ markup), it means the house is costing me more to build and thus the value will be less ~ I've got quote from Halliday for a bigger Bonair evaporative cooler with 8 outlets for $4,900 including installation; but Mcon will charge $7500 for that. So that's 2600 or 50% more for that unit ~ and I'm sure it'll be similar case if I have to get the builder to do EVERYTHING like landscaping, fencing, etc. If the bank won't pay the builder for the fencing or evaporative cooler or windows furnishing when the house is completed, then obviously the builder couldn't pass me that cheque to pay for those items individually, so I am kind of stuck. Commonwealth Bank just won't accept seperate invoice or quotation from seperate supplier for those works, and they just advise me to look for a builder that will do EVERYTHIHG (to me that is a very stupid and costly suggestion). Here I go, I will have to visit the display village now to start my conversation like "will you do absolutely everything and put everything in one contract" Has any First Home Buyer experienced the same situation like me (or maybe you got your loan from CBA), and is there a way to work around it with the builder (eg. increasing the base price of the house and get a builder rebate from the builder later on instead of putting things in allowances?) Re: How does allowances work? 7Jan 19, 2009 12:49 pm What happened to us was, the floor tiling was included in the contract, but after contract was signed, we asked it to be removed.
Therefore, we had extra funds available after settlement. After settlement, we instructed the bank to deposit the money to our linked account. ----------------------------------------------------------------------------------------- Built the Nevada 42 Next project - landscaping! Re: How does allowances work? 8Jan 19, 2009 12:53 pm VJ What happened to us was, the floor tiling was included in the contract, but after contract was signed, we asked it to be removed. Therefore, we had extra funds available after settlement. After settlement, we instructed the bank to deposit the money to our linked account. But the thing is, after each stage, the bank will send an evaluator to check the house has everything it says in the contract; and if the house is completed without the floor tiling, then CBA (in my case) won't pay for that. Is it or is it not? Re: How does allowances work? 9Jan 19, 2009 1:10 pm isn't it the allowance section is part of the contract? Blog - http://clageonewhouse.blogspot.com/ Building Thread - viewtopic.php?f=31&t=10886&hilit=milan I am in, with my husband and my beautiful bunny Re: How does allowances work? 10Jan 19, 2009 1:25 pm claego isn't it the allowance section is part of the contract? Yes allowance section is part of the contract, but the mortgage broker warned me that if by the time the bank evaluate the property, it needs to be there. And if it's not there, the bank won't pay for full amount. ie. If the house land contract is $200K with $180K building cost + $20K allowance for landscaping, ducted cooling, windows furnishing ~ The bank need to see the landscaping, cooler, etc ... DONE by the time the house is complete. Otherwise, they will only finalise the payment of $180K to the builder not $200K ~ Does this make sense? I am so confused about how this work now and really stressed me out Re: How does allowances work? 11Jan 19, 2009 3:23 pm WallaceTai - that is exactly how the Bank will do it. They may not necessarily send a valuer out at each and every stage but they definitely do at the every beginning and the very end to ensure that everything is done to the original contract.
Someone mentioned that they asked for an item to be deleted once the contract was issued. Normally the valuer will note that the work hasn't been completed as per original valuation and this can then lead to massive problems at the end. The only way you have to get everything done is either have the builder do it (and possibly pay massive markups) or alternatively provide quotes for the extras providing the builder will allow the work to be completed as the home is constructed. Other then that - maybe you just need to get the home built, save during the meantime and possibly refinance at the end if the completed valuation has increased in value. Which is all circumstantial with the market in it's current form. Some things are worth waiting for. Re: How does allowances work? 12Jan 19, 2009 3:40 pm Your other option is to build the base house at a price you can afford that leaves you with some money left over each month.
We did this with our first house and we lived with concrete until we saved to buy the tiles and we learned to tile ourselves. We saved for carpet and air conditioning. Our parents bought things like a letterbox, clothesline etc for birthdays while we were building. We got some ikea flatpacked cupboards for our first christmas in the house to put cupboards into the laundry. When we had our housewarming, we asked everyone to bring a plant/shrub/tree and that started our garden. You don't have to have everything in your first house and you don't have to have it when you first move in. You need to work out what you are must haves and what are nice to haves. Good Luck! Re: How does allowances work? 13Jan 19, 2009 6:59 pm Back Pocket Your other option is to build the base house at a price you can afford that leaves you with some money left over each month. We did this with our first house and we lived with concrete until we saved to buy the tiles and we learned to tile ourselves. We saved for carpet and air conditioning. Our parents bought things like a letterbox, clothesline etc for birthdays while we were building. We got some ikea flatpacked cupboards for our first christmas in the house to put cupboards into the laundry. When we had our housewarming, we asked everyone to bring a plant/shrub/tree and that started our garden. You don't have to have everything in your first house and you don't have to have it when you first move in. You need to work out what you are must haves and what are nice to haves. Good Luck! Thanks for the suggestion, however, it will be much easier to manage just ONE mortgage rather than serving the mortgage plus saving for this & that at the same time ~ Usually a $20000 difference for a mortgage at 6% with 30 years term will make a differece of around $28 a week. It will be much easier to pay that extra $28 than saving $20000 while I am paying mortgage right? So if there is a way to get around the system, I will definitely prefer to do it that way. Plus there could be lots of time wasting in "renovating" a new home, which is what I try to avoid when buying a new home in the first place. I will see if the builder could come up with some smart way to combat the stupid bank system. If they are lending me 95%, why would they want me to pay all the massive markups to the builder to decrease the value of the house anyway? If I get people from local papers to do the job, I would expect to cut down those cost for windows furnishings, evaporative cooler with 8 outlets, landscaping, timber decking, etc by at least 30% (if not 50%). So if the builder charge $20K, I could probably get them done with $12K. I couldn't see why the bank cares about whether it's ONE contract or one contract plus several invoices from suppliers for those specialised items. Especially if I have friends who work a handy man, they would just charge me the cost of materials rather than the full labour (Bonaire Evaporative Cooler is sold by $1700 for the bigger unit, but will be charged for $7,500 when the builder do it ~ so the major % is labour). Re: How does allowances work? 14Jan 20, 2009 7:13 pm Mortgage managers who use wholesale funding and make the assessment decisions in house are always flexible with your suggestion. I have had customers where they used independent suppliers to install a/c, driveway, landscaping, etc. after construction but before occupancy certificate. All these extras were financed by the lender. Block of two storey townhouses requires painting on the roof. A brick parapet wall separates each unit and extends above the tiled roof. The parapet walls require sealing… 0 3503 I posted the floorplan on Houzz.com forum and got some really good ideas and advice from people there. Then we reached out to a couple of renovation companies and one… 5 10103 1) I had requested R6 ceiling insualtion batts, however I noticed that on some areas there are huge gaps which will allow hot air to sweep in, and also noticed black/grey… 0 3597 |