Finance is the first thing that needs to be organised before starting down the process of building.
One of our roles is to ensure that you have finance organised before you start looking for a section and planning to build. Without cash or finance you can’t begin the process of looking for land and designing your new FirstBuild home.
Finance for building a new home is different from the finance required to purchase an existing home. There are issues around deposits, timing and paying builders like FirstBuild to complete the project.
You can talk to your bank and ask them about construction finance. Alternatively, there are finance brokers that may be able to organise construction finance. We recommend NewBuild finance, because construction finance is all that they do, and they’re very very good at it. Just a note: we refer many clients to New Build finance because they are really good at getting finance at good rates. We don’t receive any reward or commission from New Build. They finance, we build, you’re happy!
When buying a new home, you are essentially buying off the plans. There is a set of plans that council will approve and a list called “The Specifications” that define what will go into your home. Unlike buying an existing home where you can walk through the home, building a new home is a leap of faith. The challenge is getting your head around what the home will look and feel like.
There are several types of loans available but the two main ones in New Zealand are Turnkey and Land and Build Contract.
This is where you pay a deposit and then one final payment at the end of the build – when you “turn the key” to your new home. This is safer for the buyer as there is usually a fixed cost for the contract. The downside however is that FirstBuild needs to finance the build and this cost is passed on.
An advantage is that you don’t start paying for the new home until you take possession, so you’re not paying rent and payments on the new home at the same time.
House and Land Package
This is where you purchase the land and engage FirstBuild to build your home on the land. Because this is a new home and exempt from the Reserve Bank deposit requirements, you can usually obtain finance with a 10% deposit.
With this type of contract there are progress payments involved, so you “pay as you go” with payments being made to FirstBuild as the house is completed. The downside is that you will be paying interest on money that is used in the build process including buying the land.
Most lenders require a 10% deposit and other items to be complied with such as
- Sale and Purchase agreement
- Fixed price contract
- Building Consent
- Registered Valuation for the completed property
Talk to your bank, a broker or NewBuild.
You may also be eligible for a Homestart Grant from the government and also be able to use you Kiwisaver to contribute to your deposit.
Kiwi saver – The ASB Bank has a good outline on Kiwisaver here.
You could be eligible for a KiwiSaver Homestart grant up to $10,000 when building a new home. If you’re doing this with someone else and they’re eligible, you could get up to $20,000 between you (for building a new home). Kāinga Ora administer this grant.
You can check with Kāinga Ora to see if you are eligible. Income caps, house price caps and other criteria apply.