Browse Forums Home Finance 1 Mar 11, 2015 1:34 pm We're a little way off a KDR but trying to get my head around the financing process... 1. We have found a home and builder we like. 2. The builder will give us some preliminary costings with our inclusions etc. (We will have to pay 5% deposit with our own cash - do we include a subject to finance clause at this stage? Do most builders accept this?) 3. Do we seek pre-approval from the bank at this point? Will they provide it?? 4. We have our home demolished (funded ourselves) 5. Final build contract is drafted after more detailed soil tests/engineering can take place. May increase/decrease contract price. 6. We then head back to the bank to have our construction loan approved. Questions... - Is my understanding of the process right? Have I missed anything? - What about the cost of driveways, aircon, flooring etc that we'd like to arrange ourselves? can we ask the bank to finance that too or do we need to keep saving?? Thanks in advance... loving the wealth of information on these forums! Re: Understanding the KDR finance process 2Mar 11, 2015 3:51 pm Jeez I hadn't thought that much about it. We are at tender stage but there's no way I'll be knocking my place down without unconditional approval from the bank! Is that really the only option at that point?! M Y C U S T O M C O R A L B R O N T E 43 ...............Kitchen! 16 Nov 2016 https://forum.homeone.com.au/viewtopic.php?f=31&t=79581 Re: Understanding the KDR finance process 3Mar 11, 2015 5:15 pm Hi, how exciting!! You have the process more or less right - I wouldn't demolish until I had full approval just in case there's an issue with the contract or valuation. Most builders don't do a "subject to finance clause", you can get an approval with the fixed price tender or draft contract and plans subject only to the signed contract, before you pay. I would include in this an allowance for any potential post contract variations and give the valuer any quotes for finishing items (driveway etc). The bank can finance these items if the valuation is there - the trick is they don't release the funds for these until they're in, so you structure the loan to have more cash out of the land than the build, where possible. Find a great broker who specializes in construction loans and they'll look after all of that for you. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Understanding the KDR finance process 4Mar 11, 2015 8:48 pm Thanks for your replies... MrsJM I feel exactly the same... bit late to realise we can't proceed once our house is demolished!! becjarrettdalton... your response is very helpful but just to clarify... do we (or our mortgage broker) head off to the bank for approval (or pre-approval) with the preliminary documentation? Itdidn't sound like the builder could provide plans until our house was demolished? Maybe I've misunderstood this... Re: Understanding the KDR finance process 5Mar 11, 2015 8:53 pm Definitely they must provide before you demolish, quite normal. It's normal even for uou to have a contract before demolition - the only thing they may not allow is for you to sign before demotion as technically they're on the clock as soon as you sign & if you don't act quickly to demolish it causes then delays. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Understanding the KDR finance process 6Mar 11, 2015 9:03 pm Having never built before, can a build contract be varied? Site costs may change, we may upgrade certain parts of the home... How does that all fit in with the bank's approval? Re: Understanding the KDR finance process 7Mar 11, 2015 9:08 pm It can, and that's the tricky bit - depending on how much equity you have. It can be very hard to change a valuation, especially if it's things like upgraded electricals, or smarter tiles - hard to convince a valuer he should increase by $10000 (for example) for more power points etc. Do as much as you can in the tender / contract process & get the builder to put in reasonable provisional allowances for what they expect you'll spend post contract & use this for the approvals. You can vary the cost out if you don't use it. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Understanding the KDR finance process 8Mar 11, 2015 9:17 pm So much to work through! Thanks again becjarrettdalton... We'll need to have a more detailed chat to the builder as we get a bit closer... Re: Understanding the KDR finance process 9Mar 11, 2015 9:24 pm But it's so much fun!! Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Understanding the KDR finance process 10Mar 17, 2015 9:20 pm I can let you know the process we went through with our builder and bank. * got pre approval with bank so we knew rough budget * had tender with builder * signed contract and paid initial deposit - funded ourselves * went through selections process, council approval etc * demolished house - funded ourselves * got final contract price including all selections variations and got mortgage sorted with bank. * we also included some additional amounts into the mortgage for landscaping. These were seperate to the builders contract and we needed to provide quotes for the additional work we wanted paid for out of loan. This included our driveway. Re: Understanding the KDR finance process 11Mar 18, 2015 5:42 am kim_kdr thanks for sharing that info... exactly what I needed. Were any "exit" clauses available to you in your contract? I'm all about worse case scenario and "what if"... thanks again. Re: Understanding the KDR finance process 12Mar 18, 2015 6:18 am Our Bank cautioned us not to sign a building contract until we had the post build valuation done by them and had loan pre approval. Once we had that we went ahead. Re: Understanding the KDR finance process 13Mar 18, 2015 6:33 am Thanks again... So when you say you signed your contract (at step 3) you had a rough guide on what your building alterations would cost you... More or less. Re: Understanding the KDR finance process 14Mar 18, 2015 7:13 am Sorry TheBigHouse, I thought kim_kdr had replied!! Re: Understanding the KDR finance process 15Apr 14, 2015 3:01 pm TheBigHouse Our Bank cautioned us not to sign a building contract until we had the post build valuation done by them and had loan pre approval. Once we had that we went ahead. The contract is not 'subject to finance' as is a loan for the purchase of an existing residential property? Re: Understanding the KDR finance process 16Apr 14, 2015 7:22 pm No it wasn't but even if it was I think the advice would have been the same. Sent from an elegant mobile device using Tapatalk. The Blog for my new house build is http://customaussie.blogspot.com.au and my forum thread is at viewtopic.php?t=74944 Re: Understanding the KDR finance process 17Apr 15, 2015 1:47 pm TheBigHouse No it wasn't but even if it was I think the advice would have been the same. Sent from an elegant mobile device using Tapatalk. The Blog for my new house build is http://customaussie.blogspot.com.au and my forum thread is at viewtopic.php?t=74944 yeah, fair enough... Re: Understanding the KDR finance process 18May 07, 2015 9:20 am So the BigHouse or anyone else, you were able to get enough info from the bank with unsigned contract, plans etc (all our plans are DA approvdd already) to know the loan would be approvdd before signing the contract? And you got that info then signed the contract? Re: Understanding the KDR finance process 19May 07, 2015 11:50 pm Yes. Give the bank plans, contract, specifications you will build to, how much you want to borrow, and let them do a valuation. Post that they can give you (or not) pre approval on the amount you want to borrow. Then sign. Call the bank you want and ask them about their individual process. Re: Understanding the KDR finance process 20May 08, 2015 6:39 am We also allowed a dollar amount in our contract for selection upgrades. We tried to include as much detailed pricing in the contract as possible. The builder had us do selecrions after the contract and finance is based on the contract amount so we had an allowance included. BLOG: http://www.ourphoenix38.blogspot.com.au H1 THREAD: viewtopic.php?f=31&t=70454 ask the surveyor for clarification would be the logical approach 1 20117 you were just referred to get advice from your solicitor. This is a legal matter. 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