Browse Forums Building A New House 1 Jan 15, 2014 8:57 pm Can anyone help me? Our bank lady is terrible at explaining things so I keep coming away even more confused. Basically I'm wondering what happens if you change your various quotes/inclusions after you have finance approved. I'm sure many builds are evolving things and this may happen all the time but our bank lady seems perplexed that this has happened. For example (very fake obviously), we had a loan approved for a: - house build $400k - pool build $40k - pantry fitout $10 - water feature $10 = $460k We have since decided to upgrade the tiles and cabinetry of the house and delay the pantry fitout/water feature for a few years, so the bills will now look like this: - house build 420k - pool build 40k = $460k The final house value should remain unchanged we believe.... So my question is - will the bank let us draw down the extra 20k for the house?? It wasn't technically in the original application so I'm confused. Or will we have to pay it somehow in cash and then the bank will reimburse us when they've done the final valuation (i.e. top the loan up to the 90% irregardless of what cost what)?? God, my brain hurts. Build thread: viewtopic.php?f=31&t=65085 Re: I'm confused about how construction loans work. 2Jan 15, 2014 9:18 pm I'd say it might vary depending on the bank. Ours won't finance anything thats not in the original builders quote, even carpet, curtains etc. Can you just call a customer service number to talk to someone else? Re: I'm confused about how construction loans work. 3Jan 15, 2014 9:46 pm I am not too sure about this too. From what I know, it really depends on your bank and how you arrange the loan. But as my mortgage broker suggest, most will only work with the original contracted amount. So the loan can contain things like carpet, curtains etc.. But anything you add after the approval, you better think of those as extra from your pocket. Also bare in mind that if you change things or exclude things during the build, it doesn't really mean that you can put in substitutes for same value or less.. From your example, you might end up with issues with your final valuation. ie: water feature you included might be seen as a "major" feature for the house and without that your valuation might come lower than expected.. So I would suggest it is better to get everything right in first place before wait till after final valuation to add anything substantial which might affect your valuation. PS: the worst thing you can get into is financial issues during the build.. much worse than having a bad builder. lol Re: I'm confused about how construction loans work. 4Jan 15, 2014 9:53 pm Hmm well the valuation has already been done and construction should start in the next week or two. But because we're doing lots of elements ourselves after handover a lot of our quotes were approximates and we will decide later exactly what we'll do. For example the quote we submitted to the bank for tiles was $5500 but we actually managed to secure them for $4500 during a sale. So where does the already approved extra $1000 go?? I'm so confused. Build thread: viewtopic.php?f=31&t=65085 Re: I'm confused about how construction loans work. 5Jan 15, 2014 9:55 pm Stacey I would LOVE to talk to someone else but she's our "loan manager" so we're supposed to go through her. I might try a generic phone number at the bank and just ask for general advice. Build thread: viewtopic.php?f=31&t=65085 Re: I'm confused about how construction loans work. 6Jan 15, 2014 10:43 pm EmyN Hmm well the valuation has already been done and construction should start in the next week or two. But because we're doing lots of elements ourselves after handover a lot of our quotes were approximates and we will decide later exactly what we'll do. For example the quote we submitted to the bank for tiles was $5500 but we actually managed to secure them for $4500 during a sale. So where does the already approved extra $1000 go?? I'm so confused. Any left over, so in above example $1,000 goes into your account at the end of the build as cash. You then either use it on something else or put back on loan. Your approved for 460k if you manage to build house and pool etc for $420k all up 40k left will go into account. What you can do is when do your building loan get a quote for landscaping say $40k then this can be paid at the end in cash to do landscaping that's what most people seem to do. Re: I'm confused about how construction loans work. 7Jan 16, 2014 12:47 am suspct EmyN Hmm well the valuation has already been done and construction should start in the next week or two. But because we're doing lots of elements ourselves after handover a lot of our quotes were approximates and we will decide later exactly what we'll do. For example the quote we submitted to the bank for tiles was $5500 but we actually managed to secure them for $4500 during a sale. So where does the already approved extra $1000 go?? I'm so confused. Any left over, so in above example $1,000 goes into your account at the end of the build as cash. You then either use it on something else or put back on loan. Your approved for 460k if you manage to build house and pool etc for $420k all up 40k left will go into account. What you can do is when do your building loan get a quote for landscaping say $40k then this can be paid at the end in cash to do landscaping that's what most people seem to do. what suspct said is what we have been told as well that anything that is left goes into our account as "cash". building thread: viewtopic.php?f=31&t=65845 Re: I'm confused about how construction loans work. 8Jan 16, 2014 11:40 am suspct Your approved for 460k if you manage to build house and pool etc for $420k all up 40k left will go into account. What you can do is when do your building loan get a quote for landscaping say $40k then this can be paid at the end in cash to do landscaping that's what most people seem to do. Thanks suspct, two questions: 1) Where you say that 40k would go into the account - that would only apply if the bank's valuation at the end of the build added up to the 460 still wouldn't it? Banks do a valuation again at the end of the whole process don't they? 2) If you had included 40k worth of landscaping that wasn't done in the end wouldn't the valuation of the house come down and so they wouldn't release that 40k, surely? This is also happening with us - we included a rough quote of 20k for the landscaping but we think we'll do it cheaper than that initially, so I presume we won't be able to access that 20k portion of the loan then... Build thread: viewtopic.php?f=31&t=65085 Re: I'm confused about how construction loans work. 9Jan 16, 2014 11:58 am This was 9 or 10 years ago... I had a contract for say rough example - cant really rememember back that far!: $150,000 - building $70,000 - land $15,000 - landscaping $15,000 - flooring and blinds Our mate was a landscaper so we knew we wouldnt be using that quote, he just beefed it up for the bank. Same with the Flooring and blinds, we had it quoted on porcelain tiles and top quality carpets. Same with the blinds. At the end of the build the bank paid the builder, we'd already settled the land and the left over was the figures on the quotes of landscaping, carpets and blinds. Our mate and us did the landscaping for a 1/4 of the "quote" and we had organised with another flooring supplier to do Laminate timber and carpet in the bedrooms, at a much cheaper rate than the quote submitted to the bank. We were still able to draw down on the full approved amount, It was just deposited as a full lump sum. We kept the unused funds as rainy day money, just in case something came up... Sort of like a buffer. We arent doing it to that degree this time, as we have a lot more savings aside than last time! Our flooring quote submitted to the bank is what we're using, same with the deck/pergola and there's probably going to be some wiggle room, some left over in the landscape quote, but thats it. We had the 2nd valuation the day or day before? handover, so none of the carpet/flooring or landscaping was even done then! They just checked the actual building and i'm assuming they just guessed that the stuff quoted would be done... Thread: viewtopic.php?f=31&t=66299 Slab: 16/6/14 Frame: 4/7/14 Roof: 22/7/14 Lock Up: 20/8/14 Fixing: 26/8/14 PCI: 9/10/14 Handover: 20/10/14 Re: I'm confused about how construction loans work. 10Jan 16, 2014 12:52 pm We are in a similar situation. We have a mortgage for the basic build and a number of fit out items. (Our bank actually requires some fit-out to be included in order to have the final house at a certain finished level). We also gave quotes that were in the middle range of those we had collected... It is important not to over inflate these too much as this can work against you as the valuation doesn't match what you are supposedly paying and the bank or LMI provider (if you need LMI) may reject the mortgage as they feel you are over captalising. Our broker told us that we would have the money available to pay for the items we have included in the contract (these items must be of the quality suggested. For instance if we said we would install solid wood floorboards, we can't change this to laminate or carpet, if we said we wanted reverse cycle air con thoughout, it isn't possible to put in one or two split systems instead etc). That is so that the valuation remains the same, as obviously these details were considered to add a set value to the overall build. Any money that remains, after the final payment is made, will then be deposited into our account to do with as we please. However this will not be released until the bank is satisfied that we have completed all the items that we factored in in the original valuation. My Building Thread:https://forum.homeone.com.au/viewtopic.php?f=31&t=66153 Re: I'm confused about how construction loans work. 11Jan 16, 2014 3:16 pm You will probably find the bank's valuation is much less than the total cost of the build. We ended up having to find some extra money for variations that were done after the loan was approved. So have some money put aside in case this happens for you1 Our build: viewtopic.php?f=31&t=64705 If this is a custom build then I would expect the builder to set out the door frame closer to the wall to avoid the gap between architrave and the wall and or specify… 9 8324 Block of two storey townhouses requires painting on the roof. A brick parapet wall separates each unit and extends above the tiled roof. 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