Browse Forums Home Finance 1 Dec 18, 2010 9:30 am Morning all When we first approached the bank for finance we only asked for basic costs. Of course during selections the price increased with upgrades etc. During the time from when we were first approved and when we applied for full construction amount less deposit of 5% (so 95% loan) we have been told that we will need to chip in around $8K. The only money we have is intended for driveway etc prior to moving in and is not $8K. I am anticipating the builder will want proof that $8K shortfall is accessible by them before construction begins and still be there when they finish construction. So far I have come up with a couple of options 1. Sell a few assets to come up with the money (this will be difficult) 2. Cancel the build and go for a cheaper option 3. Try and get a personal loan to cover the shortfall The bank has stuffed around for weeks and weeks and in the end had a valuer value our property as it would stand once built. Amazingly the price is the exact cost of land purchase price and construction cost, what a waste of time and money... This is starting to really stress me. We are supposed to start by 31/12/10 but clearly that will not happen partly due to delays with builder getting the invoice to us and now the bank. Mostly I guess I want to know if anyone has experiences this dilemma, and if you did how you managed it. Thanks in advance for any responses. Ps. I know there would have been far better ways to manage this to start with but "if only" is not going to help me now. I've already done it and it didn't help Thanks Nettie.b Building Memphis 26 with Eden Brae 31 Jan 11 Scraped Re: Cost to cancel contract. Not enough money 2Dec 18, 2010 9:54 am Hi Nettie, I'm sorry to hear you are in this situation and I hope you are not feeling too stressed and overwhelmed at the moment. Personally I would take the personal loan or even put it on my credit card. Then I would pay this amount of ASAP I hope everything works out for you, I am sure this must be your dream home that you have spent a lot of blood, sweat and tears Re: Cost to cancel contract. Not enough money 3Dec 18, 2010 10:03 am A couple of ideas 1 Go and talk to the builder about reducing some of your planned upgrades. The builder would rather see a house built than lose the contract. You also want to avoid losing any money through the builder keeping some of your deposit to cover the work he has done up until now. 2. Save money on the driveway by doing in gravel until you can afford to have it concreted. one of our neighbours has had a gravel driveway for four years and its stood up quite well The Harder You Try - the Luckier You Get ! Web site http://www.anewhouse.com.au Informative, Amusing, and Opinionated Blog - Over 600 posts on all aspects of building a new house. Re: Cost to cancel contract. Not enough money 4Dec 18, 2010 10:33 am The Memphis is a stunning house, just stunning. I would think if you tried to cancel the contract now that you'd lose the 5% deposit you've put down, which I'm imagining is more than $8K. As for the valuation, while it would be nice to have a higher valuation, they generally err on the side of caution so to have it come in on what you've paid is a good thing! I've heard more than 1 horror story where they valuation has come in well under You could always get it independently valued again after the build is complete to borrow against the equity that will actually be there if you know what I mean? You've come so far and to throw it all in for the sake of $8K I really don't think is worth it. Like Bashworth mentioned, make do with a cheaper alternative for the driveway for now and beg, borrow or steal the remaining sum you need. And you are right about needing to show EB proof of the $8K before the build can commence. Best of luck with it all Building an Eden Brae Saville 27 http://karry327.blogspot.com/ Building thread https://forum.homeone.com.au/viewtopic.php?f=31&t=44247 Re: Cost to cancel contract. Not enough money 5Dec 18, 2010 10:51 am Thanks for your responses and concern I'm not really sure why the valuation was done. I think our broker must have asked for it, although he suggested the bank wanted it done. Anyway.. The driveway is probably a good idea, DH will need to swallow his pride and accept that it simply wont be done straight away. Do you know if EB require you to put it in their holding account?? (not sure where its actually held but i know there is a specific process for it). lol I had wondered about reducing costs of house but broker said something about that not helping. Cant quite remember why. I've emailed the broker to find out exactly why they wont lend the full amount. I'm sure he said its not service ablilty its something about loan amount and LMI going over 97% of the value. Has anyone heard of that before Thanks Nettie Building Memphis 26 with Eden Brae 31 Jan 11 Scraped Cost to cancel contract. Not enough money 6Dec 18, 2010 11:07 am Next to no lender will lend more then 95% of the total build. You need to use your 5% first prior to the bank releasing any funds. As well as covering any fees and charges. A bank will pretty much always do a valuation for a new build but the chances of them coming in higher then your contract price are pretty close to nil. As sad as it is you need to stop and have a hard think about your situation. It may be the case that you need to build a smaller and cheaper house without all the bells and whistles. Since the GFC lenders are under strict scrutiny from the Govt and other regulatory guidelines. Start small then the next home can be bigger and better. At the end of the day you only need four walls and a roof. Any thing else that you can afford is a bonus. Some things are worth waiting for. Re: Cost to cancel contract. Not enough money 7Dec 18, 2010 1:33 pm If you transfer to a different house with the same builder rather than cancel entirely, you will not lose your deposit, you may only lose a small charge for drawings (around 1 or 2k). Memphis is an Eden Brae design(??) perhaps you could go to a smaller house with them. I leave you to fend for yourself, figure things out yourself. Terrence Malick Re: Cost to cancel contract. Not enough money 8Dec 18, 2010 1:42 pm Sorry to hear of this nettie.b - building can be very exciting but also very stressful. nettie.b I am anticipating the builder will want proof that $8K shortfall is accessible by them This is correct. Before your file is released to construction you will need to provide a bank statement proving you have the shortfall of funds which your bank is not providing. You will most likely pay this amount with your first progress payment and then your bank will contribute all other moneys as stated in your loan amount (well this was the story for us as we paid 50% cash and 50% loan with bank). Unfortunately with building a lot of costs can arise unexpectedly too. Do you have provisional sums in your Contract? These can come in at a higher amount and then you'll need to provide money for that. What about extra tiling? We had to pay our tiler on site for feature tiles to be laid, polished porcelain tiles to be laid etc. Are your site costs fixed? Can you incur additional site costs when site starts? What I'm saying is that there are alot of other costs with building not just "x" amount which needs to be paid to the builder. I know you mentioned not being able to pay for your driveway if you use your $8k, but after construction there is, driveway, letterbox, landscaping, some people need front retaining walls, fencing, blinds and curtains... Will you be able to meet these expenses as well? Are you building in a new estate which has covenants that these items need to be done within a certain time after building? Perhaps your builder will be willing to let you alter your upgrades. Is there anything you can do later on down the track which you have included in your upgrades. I personally would first consult with your builder and ask them to assist you to meet your budget requirements. Otherwise, is there a smaller version of your chosen house plan you could possibly build? Good luck! Re: Cost to cancel contract. Not enough money 9Dec 18, 2010 1:55 pm To be honest, $8k isnt alot of money - so you need to question if you are getting in above your head. Have you factored everything else that you will need during the build and do you know where that money is coming from? You mentioned about the driveway, but have you considered curtains, insurance, rates, rent while your waiting on the build, etc I dont mean to be a wet blanket - but sometimes its better to wait and be comfortable with your position than to rush in and struggle Personally, I would be hitting up the rellies to chip in a few $$$ and perhaps sell some junk - or as mentioned previously - get what you can afford now and wait for the extras. Having a credit card or unsecured loan right at the start is only going to make it more difficult later Good luck Re: Cost to cancel contract. Not enough money 10Dec 18, 2010 4:41 pm Lunchtime Personally, I would be hitting up the rellies to chip in a few $$$ and perhaps sell some junk - or as mentioned previously - get what you can afford now and wait for the extras. Having a credit card or unsecured loan right at the start is only going to make it more difficult later I agree with this suggestion. It's a better option than a personal loan or credit card as it's interest free. You can only ask the questions to the rellies. You never know if you don't ask. Someone may be able to help. You sound disappointed with the valuation. I know it would be a pain when you're trying to borrow the greatest amount you possibly can. You need to remember that bank valuations are normally conservative and the value given is generally what you are paying for the property as the bank prefers to play it safe. Maybe it is worth more. If you're still struggling to pay back the $8K (from the rellies or whoever else you managed to get it from) once you've built, you can always look at refinancing and you might be able to borrow more once the house is completed. Maybe you'll get a higher valuation for the completed property. Maybe your circumstances would've changed and you may be earning more. I would at least speak to the builder about what's going on if I were you. They may be able to do something. I'm sure you're not the first person that they've dealt with who's had this problem come up. Good luck with it all. Re: Cost to cancel contract. Not enough money 11Dec 18, 2010 7:32 pm Lunchtime You sound disappointed with the valuation. To the contrary, I would have been surprised if they come back with any other amount. I have no idea why a valuation was even done. Seemed like a stupid idea to me. I think the bank wanted one done. A waste of my time and someone else's money. Lunchtime To be honest, $8k isn't alot of money - so you need to question if you are getting in above your head. Have you factored everything else that you will need during the build and do you know where that money is coming from? You mentioned about the driveway, but have you considered curtains, insurance, rates, rent while your waiting on the build, etc Your right, in the scheme of things $8K probably isn't a lot of money. What money we do have has been set aside for driveway and turf etc. Floor coverings are included, blinds already purchased, were already renting since we sold our house, all of those sorts of things are not the problem. We have fixed price tender so there shouldn't be any unexpected costs there. Anyway i am giving some thought to the idea of changing to a different plan. That could make a difference but I'm not really sure how much. If it's only $10K less and its going to cost a couple to change plans etc it probably isn't worth it. There are funds sort of spread around in a few different pies we might have to gather up to keep this going. Appreciate all the responses. If anyone has any other suggestions or has actually been in this predicament i would love to hear about it. Nettie Building Memphis 26 with Eden Brae 31 Jan 11 Scraped Re: Cost to cancel contract. Not enough money 12Dec 18, 2010 8:09 pm Does your package include the driveway. Granted it is 12 months since we signed but the package did have the driveway in it. They will require a statement from the bank assuring the total funds. Our bank did a valuation when we signed also as well as after the slab was laid and then will need another at completion. Each of the previious valuations have just been to assure that the land was not overpriced and the slab was to Australian standards. The final valuation is expected to be over the cost of the land plus construction but I know some people have had the valuation less than that. EB will not start construction until the funds are available and ready for release. For example we could not utilize our savings unless it was put into a trust with the builder or was incorporated into the loan. The Memphis is gorgeous and I would suggest decreasing some of your upgrades. A lot of them can be done after handover cheaper or without difficulty too. It depends on how motivated you are to get those things done though. Re: Cost to cancel contract. Not enough money 13Dec 18, 2010 8:10 pm Does your package include the driveway. Granted it is 12 months since we signed but the package did have the driveway in it. They will require a statement from the bank assuring the total funds. Our bank did a valuation when we signed also as well as after the slab was laid and then will need another at completion. Each of the previious valuations have just been to assure that the land was not overpriced and the slab was to Australian standards. The final valuation is expected to be over the cost of the land plus construction but I know some people have had the valuation less than that. EB will not start construction until the funds are available and ready for release. For example we could not utilize our savings unless it was put into a trust with the builder or was incorporated into the loan. The Memphis is gorgeous and I would suggest decreasing some of your upgrades. A lot of them can be done after handover cheaper or without difficulty too. It depends on how motivated you are to get those things done though. Re: Bank wont approve loan for construction 14Dec 19, 2010 9:36 am No the driveway isn't included, we opted to take a credit for it instead, EB suggestion because the credit wouldn't have actually completed the driveway due to the slope. We'll get there. We can save up for what has to be done while we are building. I'm a bit more optimistic today. I had a look at our finances last night and I think we will be able to cover it without selling the kids..damn.. The only things we really will need before we move in are some kind of driveway, gas connection (we are having underground bottles), remainder of our fence because we have a dog and were on a corner so x 3 (house next door has done one side fence (part of their package and no cost to us *yay*), letterbox, light globes haha, phone connection, insurance etc. I'm sure there are other things and we'll manage those as we go. Think I'm just more peeved that the bank (which bank you ask, yes that bank) are stuffing us around for so long. If it wasn't for them we would have started several weeks ago. Only plus is we don't have to wait over the xmas break now looking at dirt or concrete just sitting there. Hope everyone has a good day and a fantastic Christmas. For all those moved in before Christmas or frantically moving over the next few days I'm very happy for you, must be a great feeling. Fernyhouse, your also building a Memphis, is that right? How is it all going, happy with things so far? It is a lovely house and I'm sure neither of us will be disappointed in the end. Cheers Nettie Building Memphis 26 with Eden Brae 31 Jan 11 Scraped Re: Bank wont approve loan for construction 15Dec 20, 2010 12:27 am Yes ours is a modified Memphis, it's not been smooth sailing however. Delays with tradies and delays that couldn't be explained and then change os ss. Followed by a temp ss who got some things rolling and not others and finally a new ss but not enough time then to get the place complete within the contract period and now into Christmas. However I did always predict wevwould not be in before Christmas Re: Bank wont approve loan for construction 16Dec 27, 2010 10:19 am One other thing to watch out as you are renting is the extra cost if the build goes over time for whatever reason, because you will be paying for the rent and at least the interest component of what ever has been drawn down for the builder until the builder finishes, and some states like ours the over time allowance does not even pay a small amount of the actual costs. But the builder can also come up with lots of reasons for extending the final build time so they don't have to pay damages. If I was to win Lotto, I would build with a different builder, now to win lotto Re: Cost to cancel contract. Not enough money 17Dec 27, 2010 12:33 pm nettie.b If anyone has any other suggestions or has actually been in this predicament i would love to hear about it. Nettie Nettie, lots of members here have been in this exact situation over the past couple of years, and most have resolved it in one way or another - many dropped some of their upgrades or built a cheaper house with the same builder, as others have suggested... I can't think of names off the top of my head, but you could try doing a search to find some threads? Take a look in the finance forum too.... Re: Bank wont approve loan for construction 18Dec 27, 2010 8:04 pm We finally have the loan approval but need to add almost $9K which is just annoying. We're going to draw on everything we have and can get our hands on and then we'll still have about 6 months to save for the things we had set aside the money for initially. We do have the Buildsure guarantee so at least if it is delayed by the builder we will be reimbursed for the rent after the contract period expires. Thanks for all of your support. Nettie.b Building Memphis 26 with Eden Brae 31 Jan 11 Scraped Re: Bank wont approve loan for construction 19Jan 11, 2011 1:21 pm Just an update and to ask if anyone else has been asked for this.. The bank is still stuffing us around. They sent us the loan documents for signing last Friday week which we promptly returned via express post. I have confirmed they were received by the bank on the Wednesday of last week. Apparently the loan is normally processed from that stage within 48 hours. Well, we're still waiting. Sent our broker a message this morning to find out if he had heard anything yet as I'm naturally keen to get the commencement of construction letter to the builder. He phoned me to advised the bank now wants to be provided with proof of currently insurance for building our particular home from the builder. Appropriate certificate showing the builders insurance has been provided already. Apparently that is insufficient. Has anyone had to provide this before? Does the bank think the builder is going to ask for the progress payments but not actually build the house or build it poorly? I swear the broker must have got the bank offside and they are just going out of their way to annoy him. Given the loan has been applied for through a broker I can't even phone the bank to discuss with them. Do I still have the right to go to the ombudsman or whoever? I have been sooo patient but I'm loosing my cool now. The broker seems to be unable to explain why this is happening. Any suggestions would be great. ps. We did have pre approved finance but due to taking out a novated lease on our 2 cars I have effectively halved my taxable income but in real $$$ of course it's worth our while. Because DH has changed jobs with lots of overtime (consistent with income of past few years and same job industry) so that has also caused a problem. I have been in the same employment for 13 years and have had a mortgage with the bank for 17 years with 2 gaps between selling and buying houses of just a matter of months. Nettie.b Building Memphis 26 with Eden Brae 31 Jan 11 Scraped Re: Bank is still suffing us around grrr 20Jan 11, 2011 8:30 pm Hi Nettie, Could I ask which bank you're going through? Ours sounds almost exactly the same as what you've gone through, we're with Homeside lending... Asking for this and that and everything else, having to put in heaps of our own money, taking FOREVER to grant unconditional approval so we could commence building (we never ended up actually getting a letter with "Authority to Commence Construction"!!)... Hope you get it all sorted out soon as I know how frustrating and emotionally draining it can be fighting an uphill battle with the banks! How much are you ahead in payments compared to where the build is at? Have you fully drawn down the loan? 5 11915 There is evidence of water on the head reveals. That could have happened during the build, or may be happening currently. There are water stains above a couple of windows… 2 3830 You’re on the right track, wire brush in a grinder then a zinc rich epoxy primer then a top coat of some sort, like a waterproofing membrane. Raising the concrete would… 1 7030 |