Where do you start??

I just want to clarify that my point on the repayments being interest-only during construction was intended to convey the fact that you will not be playing a flat percentage of your scheduled principal+interest repayment based on the percentage of the loan you have drawn (which is what I suspect the OP was thinking).

This will make it a little easier to juggle the rent+loan repayment issue as the build progresses - of course once you take the rent out of the picture after moving into your new home then the financial pressure will ease, it's just the bit towards the end of the build where things can get a little tight and only having interest-only repayments on the loan during construction makes it that little bit easier to get through.

eg.

We have drawn 90% of our loan so our "normal" repayments would be 90% of ~$2300, which equals ~$2070.

However as we are only on interest-only repayments (which is standard practice for a construction loan for what I can gather) our repayments are ~$1700. Paying a bit less on interest-only repayments will help ease the pressure a little and every little bit helps when you are paying $2.5-$3k per month in total on rent and your loan.

I realise this now, cm, thanks for clarifying! The main thing I'm worried about is the building taking longer than expected, and the end of the period when the interest repayments are higher due to the house being close to finish. A lot of people are saying it could take a lot longer than you think to build a house, so we need to be know that while the initial land-only interest payments may only start at $500 p/m, they may end up at $1,800 p/m, which is is a lot of money when you're also paying rent; especially if the building stalls at a point where you're paying the higher payments, but it's still months to go before it's finished (you never know). We don't have any issues with saving up for the deposit; if we don't have enough for the 10% plus extras by the time we want to sign a contract, we simply won't do it. I think a lot of people assume that because I'm worried about the rent + land/house interest payments while building (only IF the building takes a lot longer than expected), we're not in a position where we should even consider building. I don't agree with this, and I also don't want to wait until we have 20% deposit, because we're getting to the point where we're not getting any younger, and we want to settle down in our own forever home. My husband reckons we should try to save so we can put down maybe a 15% deposit, but I'd rather put down 10% and save that 5% for extras for the house, because there is no "reward" for putting down between 10-20% (other than the slightly smaller repayments).

That's just it - if your anticipated mortgage repayment is going to be around $2k per month then your interest-only repayments wont get anywhere near $1800 per month (remember we're 90% drawn on the loan which is as much as you can be before handover and we are only paying ~$1700 out of our "full" repayment of about $2300 p/m).

ie. you won't get up to that $1800 figure you have mentioned here on interest-only repayments if your full loan repayment is scheduled to be around the $2K mark.

In any case you need to do your sums and work out whether a house+land package where you might not be required to make progress payments until the end is an option (as I've mentioned previously I'm not sure if builders do this nowadays) or whether you'll be comfortable with picking up your own block and getting a builder to build on it.

Either way delays can occur - you need to be able to work through the pointy end of the build if you do get delays so budget for that semi-worst-case scenario and if your build isn't delayed then that's great, more $$$ to put into the house after you move in.

You're correct on the 10% vs 15% deposit to some degree, although the mortgage insurance is calculated on a sliding scale based on how far above the 80% LVR threshold you are on your loan (ie. you pay more for mortgage insurance premiums for higher LVR's).

I found a quick calculator you can use - although it's a cheap marketing tool - but you can get some idea of how the mortgage insurance premium will differ for differing LVR values (the higher your deposit the lower the LVR).

It might not be such a bad idea to chat worth a mortgage broker at this point - the initial chat should be obligation free and doesn't lock you into anything, so you can discuss your finance options in terms of deposit amounts, the amount you can/want to borrow, what sort of bllpark figure you should have in mind for house + land, etc.

Another thing to explore is the FHOG arrangements - I think the existing arrangements are up for review soon and some concessions such as the Home Builder's Bonus in NSW may be coming to an end in 2012, so you need to do your homework on the FHOG as well.

Thanks, cm! I don't know why people have been telling me that with a loan of $270,000 I'd be looking at $1,800 p/m interest repayments... But it's a relief to know that this is very unlikely.

It would be great if we could find a package without progress payments, but unfortunately I haven't come across anyone that does this in my research. Although I've only just started, so there may be many more option that I haven't discovered yet!

We will definitely talk to a mortgage broker. In terms of mortgage insurance, this is something we've thought about, and according to various calculators, it will come to about $5k. We can factor this into our savings for sure.

In terms of FHOG, it kills me that we're just missing out on the extra $10k building boost that expires in 3 days (in QLD) - most builders have doubled it, so you'd be getting $27k just in grants and boosts! We would be able to start now if we had that kind of support. We can only hope that they continue the $7k FHOG for when we sign a contract, it will help a little bit, but it still sucks to think of the bad timing and the extra $20k we could have gotten if only the rules had been different for self-employed people.

They were probably just working off 90% of your full (principal + interest) repayment as you will have paid 90% of your purchase price after the fixing stage invoice has been paid.

The FHOG stuff is a pain yes and with the change to a Liberal/Nat government now who knows what will happen to the rest of the FHOG (Libs ans especially Nats tend to cut funding for things such as subsidies for urban home construction, not ramp them up) - you'll just have to play it by ear and factor it into your calculations when you start trying to figure out when you want to start building.

I wish you luck on your building journey, regardless of when it begins!

$270,000 at 6.54% over 30 years is $1,714/pm, P+I. At 7% it would be $1796, P+I. Interest only, $1,800/pm is 8.00%.

I don't know if that helps.

And don't worry, I know what it feels like to be screwed out of $20k: I entered a land contract on April 26, with all accounted for giving me $26k back. The offer from April 1st to April 30 is for $46k

Thanks. How come you don't get the $46k if you signed the contract in the month of the offer?

Because I mis-typed

I should have typed Feb 26, not Apr 26

[quote="akashra"]Because I mis-typed

I should have typed Feb 26, not Apr 26 /quote]

Oh. *lol* Yeah, that sucks big-time.

Oh. *lol* Yeah, that sucks big-time.