Browse Forums Building A New House 1 Jan 19, 2012 11:28 pm G'day, found this forum through another forum when searching for an answer or some support with my dilemma. My wife and I have decided that this year we're going to buy a house. It's pretty much our next step after we got married last June. We're of course first home buyers and on a 'new' home are eligible for $26,500 total grants ($7,000 + $13,000 + $6,500 regional bonus due to our location). We are in Victoria. We looked at the first option of building as there's a massive land development literally around the corner from us and all the major builders have displays set there with packages to choose from. After meeting with a broker yesterday who was quite helpful, but rather confusing, I'm just about to scrap the building idea and try something else after learning about the whole process of 'progress payments' during construction and drawing down a loan progressively. I'm very very reluctant to take to the idea even if it's interest only payments, it's still payments that are on a property that we're months (potentially years) away from living in and towards the end it pretty much triples our expenditure on rent we pay now. Not an option as I can see that by the end I won't really care about the house and we'll probably end up divorcing under the stress. I have noticed in our area in particular that there are a couple of agents that sell properties that have either been completed recently, under construction already or are yet to commence construction. I have seen in other areas other agents advertising these with the caption of "No Progress Payments! Pay Deposit Now, Balance on Completion". My first question I guess is, is that the normal practise with agents that sell these properties even when construction hasn't started? Does it depend on each one individually? The next issue is stamp duty. I know that by building you only pay stamp duty on the land value because there's no house yet. However, I've seen the agents selling the houses that are under construction saying "buy off the plan, save thousands in stamp duty". I've trawled through the SRO site and tried to make sense of it all as to exactly what stamp duty is required and whether it's avoided on the structure value completely by some trick the agent use to bend the rules or if it's based on the stage of construction which I've heard from other sources. Today I have sent inquiries to a number of agents, also called them and left messages with no reply. I simply want a straight answer from someone. Even the builders I spoke to today to try and get my head around the progressive payment system (which in the end made sense) and still got a few different answers. This was particularly to do with one saying "here's your house/land package, you pay for that" with another one saying "land settlement first, then we do a second contract for the house". It's like going around in circles. All we're after is a straight contract, land, house that has a floor plan that works for us. We don't really care about much else. We're not looking at designing some spectacular home to our own specifications, engaging any specialist private builders or making major changes to existing packages. I'd really like to hear from anyone who has bought one of these homes sold by agents that are new constructions. Thanks. Re: Agents Selling House & Land - Construction Commenced 2Jan 20, 2012 7:28 am I think you may be over complicating things and creating concerns for yourself. For the building and construction process you progressively draw down progress payments as the build continues. The loan is interest only during the construction process and you only pay interest on the amount drawn down. Yes when you are renting it is a double whammy towards the end when you are paying rent and interest on most of the mortgage but that is part of the budgeting process. How much of a double whammy depends on how long the build is. For a project builder it may only work out to be a couple of months where this is significant. If yoy buy one of the other sort of properties you mentioned you will more than likely end up paying the same or more. The builder/developer will have financing costs ( just like you) he will expect to recoup and make a profit on. This will be embedded in the price you pay for the property. Look at all the options but you won't necessarily be saving any money by looking at the pay deposit now and balance at completion options. It may suit your circumstances and/or your cashflow but it won't save you money. Slab Down: 2/6/11 Moved in 13/3/2012 Current Status : Waiting for the garden to grow. My build thread : viewtopic.php?f=31&t=47031 Re: Agents Selling House & Land - Construction Commenced 3Jan 20, 2012 8:05 am Thanks for your reply, even though you haven't really answered my question. Crow For the building and construction process you progressively draw down progress payments as the build continues. The loan is interest only during the construction process and you only pay interest on the amount drawn down. As I explained in my original post, I'm well aware of that. I've done the sums on the amounts we're looking at so I know the figures. The first two stages are probably workable but after that it gets ridiculous and payments jump significantly. Don't get me wrong, house payments are fine with me but rent at the same time is, for me anyway, way over the top. I can see the point if you're building some 'dream home' that you have designed yourself but when you're just picking a plan and suits and going ahead I think it's just a bit of over-committment, for us anyway. Crow If yoy buy one of the other sort of properties you mentioned you will more than likely end up paying the same or more. The builder/developer will have financing costs ( just like you) he will expect to recoup and make a profit on. This will be embedded in the price you pay for the property. I have noticed this may be the case looking at the comparison figures. Crow Look at all the options but you won't necessarily be saving any money by looking at the pay deposit now and balance at completion options. It may suit your circumstances and/or your cashflow but it won't save you money. Not really looking at saving money, just trying to a buy a house that's fair using the maximum government grants that are available while they still last. You've managed to address stuff that I already know. I'm really after info about the stamp duty issue on under contruction homes being sold and the thing about agents selling these properties prior to construction and are they still structured as a contruction loan. Re: Agents Selling House & Land - Construction Commenced 4Jan 20, 2012 10:25 am The specifics of the questions you are asking will depend on the particular deal of the contract you enter. a). If the contract is set up as a land and then with a construction construction contract then stamp duty wil be on the land only as the stamp duty is levied on the transfer of title from the developer to you at the cost of the land. The construction costs are seperate and do not incur stamp duty as there is no transfer. The developer will not transfer the title to you unless the land is paid for so to get the reduced stamp duty you will most likely have to get some form of loan for the land then a construction loan with progress payments for the building. b). If the contract is setup that you buy the finished house upon completion then stamp duty will be levied on the transfer of the title from the builder/developer to you based the total amount you purchase for. ie on the finished land + construction cost. If the home is purchased while it is under construction then stamp duty will most likely be payable on the total cost as the value for stamp duty will be based on the value for transfer which will be the total cost as the developer will not receive their money and transfer the title until it is all paid for. As to whether the borrowings are structured like a construction loan or not depends on the deal. If you the contract says you pay a deposit and the balance at completion then it will be like a normal loan. If the contract says you pay a deposit and then amounts during the construction then it will be structured like a construction loan. I am sorry if that already answers what you know. You may have to be a bit more specific about what you don't know as your question is a bit like "how long is a piece of string". Slab Down: 2/6/11 Moved in 13/3/2012 Current Status : Waiting for the garden to grow. My build thread : viewtopic.php?f=31&t=47031 Re: Agents Selling House & Land - Construction Commenced 5Jan 21, 2012 9:10 pm With the style of purchase you are suggesting most of the time you will get little to no say on colours, options etc. You will also need to be happy with the floorplan. If you have not started the purchasing process yet my best suggestion would be: * Work out the builder you would like to build with an the H&L cost * Find out the companies construction timeframe, they will have a set time ie 26 weeks. If they don't deliver by that date then they will generally pay you a penalty fee for each day/week they are late (make sure this is your rent cost or higher) * When you know this timeframe, wait to start the process until you have funds to cover the mortgage for that period (or your rent) in the bank. You can then just sit back and get what you want. My process is slightly different as I will have 2 mortgages but have set aside enough savings to cover my current homes mortgage until after construction is completed. The price you're seeing for a high-spec 2-storey home in Perth sounds steep, but unfortunately, it's kind of the norm these… 8 8040 13 6636 DIY, Home Maintenance & Repair That laser level looks lovely! We bought one for less than a quarter of that price off eBay. It worked really well for us and it's still going now, five years later. After… 1 16717 |