Browse Forums Home Finance 1 Apr 29, 2019 3:55 pm Hi all! Long time lurker, first time poster. In short, we are looking to build a new home through a big-name builder on the block of land that we own. Construction would start in about 12 months and be complete prior to the end of 2020. Up until now we believed that we would need to obtain a mortgage of about $450,000 for the build (all inclusive), but recently a (huge) stroke of luck means that we will have about $370,000 in ready funds available and can save/find the balance of $80,000 over the next 12 months. How do builders require outright purchases to proceed? We realise that with a construction loan, the contract sets out stages of payment according to an agreed schedule (based on the lender agreeing to fund). However, without a loan, what are the terms of payment in that case? For example, does the builder need to see that we have the total amount of funds available at the time the contract is signed; full access to a proportion of the total (say 75%) and an explanation of where the remaining funds will be sourced prior to the end of construction, or is it subject to progress payments similar to an approved construction loan (ie deposit, slab, frame etc)? We have asked our builder this same question and have been waiting on a reply, but would like to hear from you if you've been in this same situation or have knowledge of different options available. Thanks in advance, look forward to sharing our build with you all. Re: Paying for a house build outright? 2Apr 29, 2019 4:05 pm Hi, well done!!! Generally, yes - they’ll want to see you have the whole lot available because if you don’t save the money they can be in a situation where they’ve expensed for the build and you can’t pay for it. Obviously you’re going to be able to pay for all but the final stage. To show you how seriously they would ordinarily require the funds in an account in both yours and the builders names with dual signatory upfront so you can’t spend it on anything else once the build commences. It’s not impossible you could get a loan approval, use that evidence but never draw on it if your savings are sufficient. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Paying for a house build outright? 3Apr 29, 2019 4:37 pm Thank you Rebecca, that makes perfect sense - I couldn't really imagine a builder being happy unless they had a 100% guarantee of every single dollar for the build. In this circumstance, would it be worthwhile to add staged construction inspection/approval agreements similar to the loan drawdown stages that are set under a construction loan? Re: Paying for a house build outright? 4Apr 29, 2019 5:08 pm You will anyway - you won't want to pay upfront, and they won't want to wait until the end Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Paying for a house build outright? 5Apr 29, 2019 9:35 pm We built a custom house through a bespoke builder, and had the funds to pay outright from the beginning. The agreement between builder and client is the contract, and that should set out the payment shedule. In our case, we agreed that we would pay all bills directly, and that included paying invoices presented by the builder. If we could not pay, then we would have been in breach of contract and they could have taken appropriate action.
I realise that not everyone can enter into a similar arrangement, but it could be worth a shot. Irrespective, get yourself a credit card that earns frequent flyer points. Pay what you can using that and then pay that off in full to avoid fees, charges and interest. At the end of the project you should have earned enough points at no cost to take a nice holiday. Re: Paying for a house build outright? 6Apr 29, 2019 9:56 pm Hmm interesting.. We just had our handover and we paid outright to our small custom builder. I didn't know some builder could make it so complex Eg. Bath parties Co signed and ensure u can't spend the money etc.. My builder just ask to show our bank balance with the amt required and that's all. Never heard about it again. No sure if he even looked at our bank stmt. Re: Paying for a house build outright? 7Apr 30, 2019 8:53 am Thanks all, there's a lot of interesting info in the responses so far. We hadn't thought about the frequent flyer card option so that will be on our list of options to investigate. We'll be sure to update this topic once we hear back from the builder, but feel free to keep any other options and experiences coming in! Thank you so much everyone. This all makes a lot of sense. I guess when you talk to a builder who butters up everything to look very polished, you get to start believing… 7 17601 1 10482 hi guys. Please be nice. First time home builder in Qld. I would like some feedback please on whether I should build my granny flat first before my main house at the… 0 4587 |