Browse Forums Home Finance 1 Sep 13, 2011 9:43 pm Hi everyone, Hoping to get some advice as I am sure we are not the first to have questions like this. We are in the process of wanting to build a new house. The banks are telling us that they will only finance the build contract and not the extras we want such as our own drapes,carpets etc as the builders are not good quality. Would like to hear from others about how you went about things. Thanks in advance. Re: Help with loan options 2Sep 13, 2011 10:06 pm It must depend on which bank you go with, I haven't come across a bank not allowing turnkey items because of "poor quality", and many people have had everything included under their loan so there are banks out there who will allow it. The bank couldn't say with definite certainty that the carpets you have chosen are not good quality - they don't know if you have up-spec'd and gone for top of the range carpet? Seems strange, however banks are tightening up in all ways so it could be a new requirement that some are bringing in. I have however heard of banks only covering the contract amount and won't cover anything that's added in prestart, perhaps that's what your bank was meaning? Will your bank allow you to put an "allowance" in your contract for those items so that they are covered in your loan, then delete them afterwards (say at prestart) so that you can arrange them yourself after handover? That's a very common thing to do, if your bank will allow it. Some banks won't allow this, because when they do the final valuation for the last progress payment the loan amount won't match what the house is meant to be worth because you don't have the carpets/window treatments in there. Re: Help with loan options 3Sep 13, 2011 10:15 pm Thanks for your quick reply CA3105,sorry to clarify we dont want the builders carpets etc as we think they are poor quality,not the bank. Will talk to the bank about what you suggested re the allowances.. hopefully they will accept this way. CA3105 It must depend on which bank you go with, I haven't come across a bank not allowing turnkey items because of "poor quality", and many people have had everything included under their loan so there are banks out there who will allow it. The bank couldn't say with definite certainty that the carpets you have chosen are not good quality - they don't know if you have up-spec'd and gone for top of the range carpet? Seems strange, however banks are tightening up in all ways so it could be a new requirement that some are bringing in. I have however heard of banks only covering the contract amount and won't cover anything that's added in prestart, perhaps that's what your bank was meaning? Will your bank allow you to put an "allowance" in your contract for those items so that they are covered in your loan, then delete them afterwards (say at prestart) so that you can arrange them yourself after handover? That's a very common thing to do, if your bank will allow it. Some banks won't allow this, because when they do the final valuation for the last progress payment the loan amount won't match what the house is meant to be worth because you don't have the carpets/window treatments in there. Re: Help with loan options 4Sep 13, 2011 11:23 pm You can get the loan with the extras sometimes, depending on what your loan ratio is, but the bank won't release the last payment to the builder until all these items are done, so if you are doing them yourself, it can be a tricky situation. We couldn't borrow the extra as our loan ratio was at 90%, the bank did take them into consideration though when doing the valuation, but we had to pay for them out of our own pocket. Our last build however, we were borrowing less than 80%, so we were easily able to borrow the extra and they deposited the extra into our account when the build was finished. Re: Help with loan options 5Sep 19, 2011 11:54 am Hi mum2matt, Rizzo is correct in saying that it all relates to how much the loan is compared to the value of the property. One of the EASIEST ways to get around this is to see if your builder is willing to 'subcontract' to your carpet company etc. and then include this cost into the building contract. If your builder is willing to do this then it will make things a lot simpler. I have in the past sent a loan submission to a bank with a building contract PLUS quotes/contracts for other items and had approval given. The key is that whatever is going into the property needs to be provided upfront. So that it can be sent to the valuer and the property can be valued with ALL the information. You will most likely need to negotiate with your builder and with the sub contractor companies to arrange how payments will be made. ie. if your builder will front the funds to the subbies in lieu of the bank sending the builder funding OR if the subbies are comfortable to wait on payment AFTER they complete work and when the bank provides final draw down. The thing to keep in mind is that the bank wants a 'complete' house as security behind your loan. If they have a building contract minus flooring, yet receive a 'separate quote for flooring. Then this completes a house for them... It is good business sense to accept this etc... It is just a matter of WHICH lender you are using, HOW it gets put together when sent to them and WHAT terms are involved with regards to the quotes/building contract. Keep in mind that these things go to the valuer to be checked against what the market thinks it would be worth.. If the sub contractor quotes/costs are not 'inline' with the quality and costings of the total build contract the valuers may make note and this could hold things up. The bank wont front YOU the money to put these items into the property.. But generally speaking done the right way.. they will fund it through the builder. The builder has a BSA, and the builder has INSURANCE. This gives the bank recourse for issues that arise within the first few years of a new property. If you are doing the running around looking at 'banks' yourself. I might suggest chatting to a broker that could KNOW who to speak to for your situation already. You may find as well depending on which banks you are talking to or 'where' they are located. The lender in that particular branch may not see a lot of construction lending and in your circumstance some more specific knowledge could be beneficial. I hope this helps you out. Regards, Trent Davidson Property Finance Consultant Residential Lending LJ Hooker Finance Brisbane North Credit Representative Number: 387283 under Australian Credit Licence:380270 Re: Help with loan options 6Sep 19, 2011 9:13 pm Hi Trent, Thanks so much for your detailed post... a few good ideas which I will followup on with the builder. Thanks again for your help, much appreciated. We have got a broker onto the case who has done a lot of construction loans so hopefully we will be able to get around it all somehow. Cheers Fiona The biggest challenge will be if you take out a loan and then run out of money - you'll have an incomplete security and lenders do not like this so you can get stuck.… 2 19114 Hi there, I'm a conplete newbie to this, but I'm looking to put a floor down in my 6x9m shed. It's currently sitting on a 100mm thick concrete perimeter (dirt floor… 0 6469 Hi, you've probably already resolved this, however, Commbank will probably pay the funds to you after you send evidence the work is done regardless the change in the quotes. 1 35332 |