Browse Forums Building A New House 1 Jul 31, 2010 12:09 am Hi all! I am brand new here, so thanks for your time! My partner and I are lining up to buy a block of land, and build! Without giving away too much, I do play a small part in the building industry in Perth, but that doesn't mean I know too much about the workings of the finance! My basic understanding is this (please feel free to correct me) We are meeting with our bank on Tuesday. We've been told that we're good for $400,000. This meeting will confirm this.. From here, we go to a builder (at this stage, Impressions, or maybe Scott Park/Content) and they can sell us land? and the build? From here we tell them what we want them to price up in a possible contract. After we sight a plan, and get a piece of land confirmed, we pay $1500 to have plans drawn up, which we then have to show to the bank for final, unconditional approval. (this scares me a little, what if the banks change their mind?) From there, we can sign a building contract. We have unconditional approval to funds. We own the land? so we're paying repayments on that? But not the build? And when do we start paying for the build, as in where do the installments start, and what value etc? The bottom line is... Should we expect this WHOLE process to take longer than 12 months from TODAY, and when do we start paying (how long do we realistically have to start saving) I am very sorry for my long winded load of questions! For what its worth, I know a lot about the process of the build, and understand a lot about product knowledge, and would love to share this over time with other forum members, I'm just stuck on the numbers side of it all viewtopic.php?f=31&t=46664 Building in Baldivis, Western Australia. First home, with Impressions. Would love it if you were to stop by some time! Re: When do you start paying for your house? 2Jul 31, 2010 12:21 am You actually start off with two contracts. First a land loan - which you will start paying for when land settlement occurs. Second once you have signed the building contract you get a repay land and construction loan (interest only & you pay by the stage of the building until complete). Once the house is finished you basically get a third loan - it pays out the construction one for a normal house mortgage. The loans are normally 80% to 90% of the land / build value and you need the balance of funds before the bank gives you money. It will probably take more than 12 months. You start paying intrest on bank money when its drawn down. You need to normally show 10%-20% savings which for average homes is around $35K to $70K. Re: When do you start paying for your house? 3Jul 31, 2010 7:42 am Eve Dweller Once the house is finished you basically get a third loan - it pays out the construction one for a normal house mortgage. BCJ - some builders will offer a 'house and land package', therefore you will only have the one loan. In most cases, the buyer (you) will source your own land, put down your deposit, sign land contracts, engage in a conveyancer etc etc. Depending on how soon your land is available to build on (lots of new estates will have stages where land is not released for titles for up to 12 months)... you may end up with 2 loans from the bank... the land loan, and then later the construction loan. If your land is close to being titled, then you may have just the one loan... (correct me if I'm wrong bank experts). If you put down your deposit on the land today, and it doesnt settle/title until 6 months from now, then you wont make any payments back to the bank until after then. You start paying the bank back the interest only amount for the amount you have borrowed for the land only. With most builders, you pay your deposit, sign contracts etc. Once land is titled, and the building works begin, you will probably pay your builder in stages. There's generally 5 stages, therefore 5 payments throughout the build. Base stage, Frame stage, Lockup stage, Fitout stage and Completion when you accept the keys. You only pay the bank the interest only amount of the amounts when they're drawn down to pay for each stage. So you can expect to be paying more as the build progresses. Hope my blabbering helps somewhat Re: When do you start paying for your house? 4Jul 31, 2010 7:48 am BCJ The bottom line is... Should we expect this WHOLE process to take longer than 12 months from TODAY, and when do we start paying (how long do we realistically have to start saving) You really need to have started saving months ago. Banks need to see genuine savings for 3 months? And you'll need a 10% deposit with most. (Other bank experts in here can help you more) So in summary, there's too many factors that can determine how long this process will take. You dont want a speedy job in the end, you want a quality job. Re: When do you start paying for your house? 5Jul 31, 2010 8:27 am Not sure if my answer is the same but I will explain our process We had one loan but in two pieces. We borrowed the land amount and made repayments from settlement on land. We the got a construction loan which extended the initial loan to cover the full amount. Now that we have started building our bank statements says something like funds available and has the full amount but then says something like funds drawn and this is the amount we are actually using at this stage. We have just made the 2nd extension as we have our slab finished- this was 25% of the total amount. So we are currently paying for the land and 30% of the house amount. Hope that helps! As to how long there are lots of variables. We chose our land just on 12 months ago and we are just starting framing. Our land didnt register for 5 months, we then made changes which takes up time and council can take a while. The paper work process is def long and took much longer then we had thought. We starting building 1 month ago. We hope to be in by Christmas which means it will have been a 16month process! Built our Granton in 2010 Handover December 3rd- wooohooo! Now the hard work has began.... Retaining walls and landscaping Re: When do you start paying for your house? 6Jul 31, 2010 10:02 am Aaron & Erin Eve Dweller Once the house is finished you basically get a third loan - it pays out the construction one for a normal house mortgage. Essentially during construction your land and building are interest only (land and construction loan). This facility exists only for the life of construction. Once your building is complete the total debt is paid out by a new (third) loan that is your ongoing mortgage (principal + interest). This is different however if you buy off the plan etc. in which case you just put down 5-10% and do one settlement at completion. Re: When do you start paying for your house? 7Jul 31, 2010 10:33 am Eve Dweller Aaron & Erin Eve Dweller Once the house is finished you basically get a third loan - it pays out the construction one for a normal house mortgage. Once your building is complete the total debt is paid out by a new (third) loan that is your ongoing mortgage (principal + interest). . Re: When do you start paying for your house? 8Jul 31, 2010 1:12 pm Eve Dweller Once your building is complete the total debt is paid out by a new (third) loan that is your ongoing mortgage (principal + interest). Not so. It depends on the bank, the type of loan you have and about a million other factors. We still have two loans and our house was finished in late 2008... I used to be a lender and believe me, there are more ways to finance a build than most people can imagine. BJC, you're really best to talk to the builders you're considering (and to your bank) to get a clear idea of how it will work. Different builders do things slightly differently, and the process can also vary from state to state. Timeframes can be pretty rubbery though - that's universal. There are way too many factors that can cause delays. Re: When do you start paying for your house? 9Jul 31, 2010 10:04 pm Quote: After we sight a plan, and get a piece of land confirmed, we pay $1500 to have plans drawn up, which we then have to show to the bank for final, unconditional approval. (this scares me a little, what if the banks change their mind?) Let's assume that you are getting a loan to buy a vacant land first, then worry about the build later (ie. worry about the build after you have bought the land). Before the bank would lend you money, they will first get a valuation done on the vacant land. Let's say you are buying the vacant land for $200K. The bank valuation turns out to be $150K. That means the bank will only lend you 80% of $150K (i.e. 120K). You then have to come up with $80K to pay the vendor. Bank will only lend you 80% so you wont have to pay LMI. If you want to pay LMI, then bank can lend you up to 90%. If the bank valuation is exactly $200K, then bank will lend you 80% of $200K (i.e. $160K). That means you have to come up with a $40K deposit. 13-08 Moved in 13-05 Build restart 13-04 VMIA compensation 12-08 Builder liquidation 12-03 Fixing 11-12 Lockup 11-11 Frame 11-09 Slab 11-09 Start 11-07 Contract 10-11 2K deposit 10-06 Titled land Re: When do you start paying for your house? 10Aug 01, 2010 1:08 pm Well, what can I say? Thank you all for your help! My partner and I have been saving for months now, and have a healthy deposit ready. Now we need to save to a) Furnish and finish the house upon completion, b) Get ahead on repayments! This has certainly helped me out a great deal, thanks once again. 1 thing I was told... If we submit an offer on land that is approved, and successful, apparently if the titles arn't ready yet, and in the time it takes to have them READY, the price of land in that area goes up, we have to pay more than initially agreed on. Is this correct? Seems strange to me. Lets face it, if the value of land went down I bet they wouldn't reduce the price for you. Sounds very unfair. AGAIN, thank you thank you. For what its worth, my partner and I spent all day yesterday visiting the area (Baldivis) and looking at display homes. We're very close to a final decision! Impressions (perth company, owned by Jcorp, therefor BGC) have a new brand called "Dream Living" or something, and it seems like good value. Anyone had any experiences with Impressions? (Maybe I should be more careful not to go off-track viewtopic.php?f=31&t=46664 Building in Baldivis, Western Australia. First home, with Impressions. Would love it if you were to stop by some time! Re: When do you start paying for your house? 11Aug 01, 2010 1:34 pm BCJ 1 thing I was told... If we submit an offer on land that is approved, and successful, apparently if the titles arn't ready yet, and in the time it takes to have them READY, the price of land in that area goes up, we have to pay more than initially agreed on. Is this correct? Seems strange to me. Lets face it, if the value of land went down I bet they wouldn't reduce the price for you. Sounds very unfair. Huh? What state are you in? I don't know what you mean by "submit an offer". If it's a new subdivision, then the land should all be priced from the instant it goes on sale, so I don't know why you'd be offering anything. You're either happy to buy it at the vendor's price or you're not. However that works, if you choose to buy a particular block, you ought to be signing a contract of sale for a fixed price, paying a deposit and that's that until settlement. The price doesn't change. Unless there's something very peculiar in real estate law and practices outside Victoria..... Re: When do you start paying for your house? 12Aug 02, 2010 9:51 pm Sorry, by saying "submit an offer' I meant more so submit an offer to by the land, as in "You want $200k? Well I offer you $200k for it.." But yeah, I see what you're getting at WA. The loans company warned us about it. I suppose its a question for the land-sales people. viewtopic.php?f=31&t=46664 Building in Baldivis, Western Australia. First home, with Impressions. Would love it if you were to stop by some time! Thanks mate. Yeah good points! Leaning towards Option 3 to get a bit extra space in the cabinets but not going too crazy high (and expensive). 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