Browse Forums Home Finance 1 Jan 15, 2009 11:25 pm Dear all,
After finished talking to my close friend who is a handy man regarding the floor plan I was interested and how I proposed to spend every cent of the loan into a "fixed" house & land package; and he warned me don't push it to the limit ~ I have no savings so virtully I am relying on the $26000 FHBG to pay for all those misc fees, mortgage insurance as well as 5% deposit; and I've got a pre-approval from CBA based on 95% borrowing with a MAX house land package no more than around $310K ~ I've signed a land contract last year in Melton Thoroughbred Park with a 700m2 land (17.5m x 40m) for $96K with the settlement date at 27th Feb ~ and the bank will only lend me the $$$ based on "fixed" price house & land package (so they will not lend me the $$$ to settle down the land first). Hence I am under HUGE pressure now as the bank usually needs 2 weeks (as suggested by my mortgage broker) to approve the loan (and hence pay my land developer before he sues me). Thus I have only from now to mid Feb to get a "house & land contract" drafted, which the volume builders could takes months to draft one since they have so many clients; while small/boutique builder promise to have it ready within ONE WEEK (is it possible??) Anyway, $310K - $96K = $214K for building/site cost As site cost will usually cost $10K; so it leaves me the absolute MAX building cost to be $204K ~ I was planning to spend every cent of the $204K to get a 25 to 28sq house with those upgrades (such as high ceiling, stone benchtop, etc) ~ and my friends suggested that it will be VERY RISKY if I do that, because if I end up spending $20K extra after changing anything during the construction, I will not be able to afford to pay the builder ~ does this make any sense? As I have NO SAVINGS at all (I still have a personal loan to pay), so based on your past experience and my max borrowing / building power (ie $214K including site cost); how much should I really PLAN to spend in the house & land contract realistically in order to be safe? And can I ask the builder to put down $20 to $30K "ALLOWANCE" for items such as landscaping, windows furnishing, evaporative cooler, fencing, etc ... so I could pay for the extra $$$ they charge (if there is any) ~ And is this kind of "builder rebates" legal and popular in Australia??? I would not be able to afford even $5K extra if they send me the extra bills at the end suddenly just let you know my situation! Some builders such as M3tricon/H3nley has promised to give me a house/land contract within 3 weeks if necessary, however, the land developers warn me this will usually delay for those BIG builders. And if I couldn't secure a loan to settle the land by 27th Feb, I could get sued by whoever the company that owns the land (which might be himself) ~ so could I trust those big builders when they promise me that they "might" be able to bypass the standard procedures and get me the house & land contract within 3/4 weeks as they promise. Of course I have to put down $1000 non-refundable deposit for them to "keep the balls rolling" as they said ~ Any suggestions will be appreciated, and sorry for the long message Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 2Jan 16, 2009 6:56 am Firstly, how much you can really afford to spend depends on your income, not how much the bank will lend you. They are two completely seperate things. If I was to take out a loan for the maximum that the bank could currently give me, I would not be able to live month to month.
Secondly, I'm not sure how the contract is going to work for you. Is it going to be a case of doing the loan in drawdowns for construction or paying everything upfront? If you are doing normal construction, I'd be checking the Victorian Office of State Revenue or whatever it's called and see WHEN you can actually apply for the FHOG. In NSW, you can apply to get the grant once the slab is down and you're ready to make the first builder payment, therefore you will not be able to use it to fund stamp duty, mortgage insurance, or the 5% deposit. This is money you will need upfront unless you get a 100% loan. Here is the link http://www.sro.vic.gov.au/sro/SROWebSit ... hog.htm#11 I'm not sure how it works with house and land packages in terms of timing. As I said, "date of first progressive payment" is actually when the slab goes down, not the 5% deposit stage. The bank will not give you any money until you have paid everything you need to pay. If it's the "off the plan home" option, it all relies on when settlement is. I would've thought settlement would be when you are handed the keys at the very end, which also means you need to come up with the money. Can anyone else shed some light on the timing here? Ask yourself, can you really afford to pay ~$1,900 per month plus your personal loan plus the normal living costs once it is complete? Do you currently pay rent? If so, can you really afford to pay rent as well as mortgage repayments during construction? Stevep79 & Principessa Finished building Wisdom Homes Impression 33mkII in The Ponds, Sydney http://lilypadintheponds.blogspot.com Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 3Jan 16, 2009 7:52 am My partner and l had no savings when we went for our house and land, i wont say the exact price but our house was below $200K with extras like eval cooling, tiles, carpet, changing windows to sliding doors, extending the alfresco and having double doors to name a few! Now things for fences and front landscaping (we've just gone being in a month, just finished the front landscaping yey!) we saved while they were building there were two of us so it made it easier.
The FHOG for us was used for usual bank fees etc, and through-out we put about $10,000 of our own money which we save during the contract/land settlement stage for the deposit, which for you won't need to worry about cause you'll have the other half of the FHOG! (can l say lucky you, l love being in my house now, but would have also loved the extra money from the gov which we just missed out on!) Then we saved additional for the fences ($3500 cause we HAD to have colorbond and we are on a cnr block so one side is not halved!), and front landscaping ($1400, fake grass, stones simple but we think effective!), and furniture through out, didn't need much for us we had been renting~ Looking back now, im amazed how much money we saved in such a short time, BUT when you have a goal at hand it comes easy! Basically we worked out what our loan repayment would be (for us it was quite high cause of the interest rate at the time). Then we paid the different btn that and our rent into savings, 1. well we needed the savings and 2. helped us get use to what was ahead, we knew if we could do it then we would be fine now, now we pay additional to our loan thanks to the rate drop! BUT we also had a bit of an adv cause the last 4months we moved in with my dad so no rent, more savings if you can do that l would def suggest that to! Is it just you going for the loan? can you save while they settle land/build? the other advice i can give be aware of the bills through-out like water rates and rates on land, we settled on 23rd may for land by 31st May i had the first rate bill, also when you move in, again the adj for rates, the councils are quick in getting that out, home phone connection (if you get one) $300, moving cost, the bunning trip, by that when we moved in their were so many 'little' hardware things we needed and we spent $500 on stuff, that did inc our letterbox! home and content insurance etc! basically budget for everything during, after and beyond and that should help you! Work out a budget inc the additional cost you have when you own a house, if you think you can afford everything with the $310K loan then go for it! we did that type of loan and we used the max we could, it was the savings & Budgeting for EVERYTHING through out that helped us, if you can save through-out and you know what cost your up for dont worry about no savings now To help the issue of adding extras through-out put everything you want in the first quote, so you then know how much it is with all the extras, if its above what you have to spent, then workout what can l afford what cant l, also inc electrical cost in the sale quote we that too, $2500, covered most of what we needed! allow perhaps $1000min for additional for color selection, we only spend $400 extra, better to over budget then not budget enough! Also speak to a builder about a fixed price site cost helps! and also locking in the price with a deposit! From quote to contract we were advised the other things that tend to change cost wise are structure, to avoid additional cost, try not to do too many structure change, the rest for us was locked in the minute we paid deposit see if you can get a builder who will do the same BIT of a long email, hoped lve helped Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 4Jan 16, 2009 8:02 am Your friends have given you good advice - you have no way of knowing what extra costs might come up along the way, what the site costs will be, or if there might be a price rise between now and when you sign a contract. So leave yourself something in reserve and save every cent you can while the house is being built.
It usually takes a minimum of a couple of months to get to contract stage with any builder, because soil tests need to be done, plans drawn up, colours, fittings and finishes selected etc beforehand. Go back and talk to your bank or broker about what your options are. Timing can be tricky.... Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 5Jan 16, 2009 8:13 am Thanks for the suggestions!
By the time the house is constructed, I should have paid off most of my personal loan; and if I could get a builder's rebate (a cheque) for those allowances, I could definitely pay the balance of my personal loan using part of those money. So I would end up with one mortgage and it will be alright ~ The only thing I worry about is ... many people in this forum seem to get charged "extra $$$" somehow even after they signed their fixed price contract, it seems there will be changes we just didn't think of right from the start ~ especially it's my first home, so I don't have much ideas about if I might miss something in the initial contract ~ I plan to put more items in the allowance part, so if I have spare money left, I could call the local builder in the paper to do the evaporative cooling for example; hope that will make sense? So if I did go over the inital "building budget", at least the builders could deduct the extra from those allowance, will it work that way??? The timing pressure is from the settlement of the land by 27th Feb, I won't be able to borrow $$$ from bank just for the land (as I have no deposit), however, they are happy to give me the loan based on a house/land contract! And I just realised it will take ages for the builder to prepare that house/land contract, so I am stuck in this tricky situation! The small builder promised to have a house/land contract ready within a week, but their price is usually higher (ie. house size is smaller without much luxury upgrades) ~ while volume/big builders seem to offer better bang for the bucks, but if they couldn't get me the house/land contract within 3 weeks as they said they could in "emergency situation", then I could pay huge $$$ penalty rates for the land that I signed ~ Have only 1 week to work out which builder to go now, it's a bit like gambling now! If I could somehow secure a FIXED SITE COST, then maybe I could bypass those soil test or whatever, could I? Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 6Jan 16, 2009 8:20 am Some house/land packages do come with fixed site costs, I know ours did, the builder already owns the land and has already done the soil tests.
I'm not sure about this "building allowance rebate" idea - we had a set cost for the land and then for the building contract - that included all structural changes we made eg higher ceilings, and then at seletions we spent another $15k on upgrades- electrical, different tiles, taps etc - and that was without anything fancy at all. In our own budget we had expected this and had allowed $20k for variations so we were happy with this. Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 7Jan 16, 2009 8:44 am Helyn Some house/land packages do come with fixed site costs, I know ours did, the builder already owns the land and has already done the soil tests. I'm not sure about this "building allowance rebate" idea - we had a set cost for the land and then for the building contract - that included all structural changes we made eg higher ceilings, and then at seletions we spent another $15k on upgrades- electrical, different tiles, taps etc - and that was without anything fancy at all. In our own budget we had expected this and had allowed $20k for variations so we were happy with this. I am planning around $20K as buffer now, actually what kind of changes I would possibly make from the initial contract? Could I (or most people) survive without changing too much from the electricals? I plan to use whatever the standard facade with NO RENDERING to save $$, so is there anything I should be aware of which I will most likely change during the construction phrases? Thank you! Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 8Jan 16, 2009 8:54 am wallacetai he warned me don't push it to the limit ~ Very prudent advice that you are well do to heed it. My question is your ability to pay based on the current interest rates? And could you still afford to pay if your rates go up by 50% i.e. 6% now, and then 9% in a few years time? That's what put a lot of people to the wall during the last boom. wallacetai As I have NO SAVINGS at all (I still have a personal loan to pay), How much is the personal loan, you should be subtracting this from the max you are planning to spend. wallacetai I've signed a land contract last year ...with the settlement date at 27th Feb ~ and the bank will only lend me the $$$ based on "fixed" price house & land package (so they will not lend me the $$$ to settle down the land first). Correct me if I am wrong, but I thought a "house and land package" was on builder land? So they are willing to guarantee their own site costs from blowout? Will someone do fixed cost on your own land? And if you have to buy land from a "house and land package" then would you still fail to settle on the existing land? wallacetai while small/boutique builder promise to have it ready within ONE WEEK (is it possible??) Even if you could, would you want to put at risk such a large amount of money on something drafted up so quick? I personally would get your finances in order first. And be honest about how much contingency you have - in this economic climate the rush to push through such a risky venture is writing the script for massive heartache in the future. I would rather pay penalty interest on a failed settlement than be rushed into a massive "house and land package" that I wasn't sure I could pay. Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 9Jan 16, 2009 8:56 am wallacetai, i think what you need to realise is that these so called 'fixed price contracts' only go over the budget when you add things that aren't already included in the package. so, if you were to go through with this house and land package be very aware of what is exactly included so you know what you're getting. all those things you've mentioned before (like stone benchtops, high ceilings etc.) all cost money. i have certainly seen promotions from builders that included the stone benchtops but am yet to see one that includes raising the ceiling height for the whole house (but feel free to correct me). so that one you might have to possibly budget for.
from my personal point of view, i think you should stop chasing the FHOG and concentrate on paying of that personal loan first. throw every cent you can to it so you pay it off as fast as you can then spend the next few months saving for an even bigger deposit. i obviously don't know your borrowing capacity and your disposable income but from the sounds of it you seem to be stretching it. and if there's anything i've learnt over the last few years regarding building/buying a house is that there's always unexpected costs. you should also know if you plan to use the FHOG as part of your deposit that you don't actually get that money until you start building. so you will have to find that cash somewhere. so if the bank is willing to lend you 95% of 310k you still need a deposit of around 15k. that doesn't include any mortgage insurance and other bank fees. anyway, just my 2 cents... [sneakersss] Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 10Jan 16, 2009 9:09 am Quote: Could I (or most people) survive without changing too much from the electricals? I plan to use whatever the standard facade with NO RENDERING to save $$, so is there anything I should be aware of which I will most likely change during the construction phrases? Thank you We paid $2, 300 on electrical without doing much - just adding power points, lighting, TV and internet points, upgrading exhaust fans - the allowance the builder gives you is very basic, it would be very hard to keep to this. This was on a 23 sq house and no downlights, if you go for them they are large upgrade. We did not have any rendering either - not as a cost issue, I just prefer face brick. Some upgrades you can do later as funds allow - landscaping, BIR's, etc. Also you can delay getting things like window furnishings, light fittings, even floor coverings until your funds allow and live in the house without them for a while. Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 11Jan 16, 2009 9:22 am Thanks for all the constructive comments~
As I mentioned before, once I pay off the personal loan (by end of year), then I should be able to cope with 9% interest rate should it happen in a few years time ~ and I might even fix the current interest rate for 3 years just to make things stable a little bit ~ Things I plan to upgrade as necessary items are: - high ceiling (2.55m or 2.7m) - double shower - concrete driveway (as the block of land is up in the first 5m then flat all the way) - carpets / tiles - alarm system (got break-in 3 times in my life, so just want to feel safer) Things I could get from the promotion are: - stone benchtop - tiled shower base (not sure if this is a good idea) - glass splash back, etc ... - 900mm cooktop, rangehood - duo shower rail Things I would like to put in allowance when applying the loans are: - evaporative cooler - landscaping for front & back (put in there as buffer $$$) - letter box, antenna, clothesline - colorbond fencing (1/2 share) - windows furnishing - dead locks Any idea for those I mention in the allowance section, what is a realistic price I should reserve? Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 12Jan 16, 2009 9:39 am I am a little concerned about you using an allowance in the building contract to cover these addition things. When the bank does their valuation these "allowances" will not be included and the bank will only finance 95% of the valuation. You would be better off getting separate quotes for these additions and submitting them with your building contract to be including as part of your loan. Also if there is a rebate on your land from the developer this will also be deducted from the valuation. Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 13Jan 16, 2009 9:41 am wallacetai Thanks for all the constructive comments~ As I mentioned before, once I pay off the personal loan (by end of year), then I should be able to cope with 9% interest rate should it happen in a few years time ~ and I might even fix the current interest rate for 3 years just to make things stable a little bit ~ Things I plan to upgrade as necessary items are: - high ceiling (2.55m or 2.7m) - double shower - concrete driveway (as the block of land is up in the first 5m then flat all the way) - carpets / tiles - alarm system (got break-in 3 times in my life, so just want to feel safer) Things I could get from the promotion are: - stone benchtop - tiled shower base (not sure if this is a good idea) - glass splash back, etc ... - 900mm cooktop, rangehood - duo shower rail Things I would like to put in allowance when applying the loans are: - evaporative cooler - landscaping for front & back (put in there as buffer $$$) - letter box, antenna, clothesline - colorbond fencing (1/2 share) - windows furnishing - dead locks Any idea for those I mention in the allowance section, what is a realistic price I should reserve? Dont know if it was just our broker, (who is no longer in business that is a different story) we were told that your mortgage can only go onto the land office and the builder, couldnt have money going to you. Where you looking to use the allowance items from the loan amount? might want to ask your broker if you can get money paid to your or another third party outside the building and land contract - evaporative cooler 6 points looking about $4800 through builder, you may get it cheaper elsewhere - landscaping for front & back (put in there as buffer $$$), front for us $1400 without decking did inc fake grass and stones, which arent cheap but last longer then bark (so im told!), with decking $4400 without plants too back, we haven't done ours yet, depends what you want to do for us its going to be costly we want pergola decking, water features etc. For us its a never ending cost - letter box, $120 bunnings, $5 for the concrete - antenna, $279 with three points - clothesline- $120 from bunnings that is the one that comes off our wall - colorbond fencing (1/2 share)- $2000- 2500ish ours was $3400 BUT we are a cnr block so one side all by ourself - windows furnishing- go with redishades for a cheaper option initially $200 to do the whole house, look good last a year apparently! - dead locks- $50 (we went through teh builder with this!) Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 14Jan 16, 2009 9:51 am Be aware that the builder selection is very limited, they may include stone benchtop as free promotion but if you choose color outside their standard range, it will be extra, this is also one of the reason people paying extra after the contract
Also during your build, you may need to pay water or electricity bill, my builder pay electricity bill for me but I have to pay for water.. so you probably need to check with them. And of course the council fee, start to pay once the land is settled.. And also don’t forget the post-handover expenses - All service connection (water, electricity, gas, internet and phone..etc) - Removalist (moving house) - Misc These are all the cost that need to spend and you probably need to factor these cost in your budget To your build, below is the upgrade I have spent and I think (to me anyway) they are quick basic and must need daily for my house - Sliding window and door locks, privacy lock to bathroom/toilet - Flyscreen - Door stop - Ducting rangehood to outside - Dishwasher - Electrical – extra power points, tv point, phone point (for alarm).. 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 home loans in sydney, house and land loan advice 15Jan 16, 2009 2:12 pm there is great advice here already. All I can say is that, house and loans are very stressful to borrowers if they have no buffer. It's going to be very difficult for you with nothing but FHOG and Boost. Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 16Jan 16, 2009 2:45 pm Wow, thank you very much for sharing your experience and suggestions!
I didn't realise those allowances can't be used as part of loan application, I thought if I can put $20K in those allowances, then I will be safe for any extra $$$ I might spend over budget ~ So for what you have suggested, I would go out and get a quotation for each allowance items such as: - evaporative cooling - landscaping, etc So does that mean I will need to submit in my loan application the following: - house & land contract - quotation for each item I plan to do AFTER the hand over which includes: a). evaporative cooling ~ $5000 b). Landscaping ~ $3000 c). Antenna, Letter Box, Clothesline ~ $800 d). Timber Decking ~ $3000 e). Windows Furnishings ~ $5000 f). Fencing ~ $3000 Does this makes more sense now? But then if I get 95% of the loan from the bank, will the bank pass that money to me as a cheque at the end of the day? Or maybe I could get the rebates from builders? Really confusing now ... If I can't get a cheque from the bank, that means I have to get the builder to do them all, and it will be VERY costly as they will put a mark-up on top of every single items which they don't usually do ~ Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 17Jan 16, 2009 3:00 pm Give a call to the bank you have pre approval with and they will be able to tell you my understanding is they won't give money to towards anything else but the house and land, because that is what a mortgage is for. BUT like i said i was told that from my broker at the time and they went broke, so i dunno!
Best advice speak to your bank and the things you really need straight away and can't afford and the bank won't do any other way then through the builder perhaps get a quote on how much, little things that arent so expensive, like TV antenna, Letterbox, clothes line (which we still havent put up been in a month!) etc pay yourself and landscaping remember it doesnt have to be done straight away, if you want something done, you can get bark cheap, throw that over the top till you can afford something better, my neighbour did that bark and a few rocks she found around the place, it actually looks good, simple but effective! then do little by little, when you can afford to do so Work out what you really must need to live in the house get that added to the builders contract, then have a list of cheaper neccessaries you can get yourself, the other things write a 'wish' list and when you have money get them But my advice is based on the bank not allowing you to use the money for anything but the house and land, if you bank said thats not the case then ignore all this, get quotes like you said and go from there GOOD LUCK! its a bit confusing and daunting in the early stages, l was like you but it gets easier as you go further into it Re: HELP!! First Home Buyer BUDGET Advice Needed!!! 20Jan 17, 2009 12:41 pm And does your Bank know that you have no funds of your own - that you are solely relying on the FHOG? This may make a huge difference to your application - have you factored in things such as mortgage insurance - which can run into thousands of dollars? Some things are worth waiting for. Not much in this responce. My suggestion is, what are you looking to build and why. This will all be impacted by the local councils planning scheme. Familiarise yourself… 6 5871 Coming back to your old stomping grounds, huh? Renovations on a budget can be quite the journey. It's like giving your house a new lease on life. The twist of not knowing… 1 3484 Hi All, I engaged a tradie to install concrete retaining wall 600-800mm high over 32 meters in Victoria. Sleepers are 200*75*2000 mm installed over 17 steel posts. I… 0 6917 |