Construction and Building Finance
Financing a new build with Construction Finance - it's easier than you think
Many people think they can’t afford to pay both rent or another mortgage and a loan for a new home while it is being built, but there are options with Building Loans and Construction Finance. Construction Finance is offered by most banks and mortgage brokers. There are some variations in specific offerings but generally it can be secured against the build, the interest rate is the same or close to the market mortgage rates, and is specifically used to fund the building of a new home. The main difference between Construction Finance and a standard mortgage is that the full amount of the loan isn't paid out all at once, with Construction Finance progress payments are made through the build of your home, so you won't pay interest on the full amount until the home has been completed.
There are different requirements in terms of deposits for newly built homes that are being built, while banks generally require a minimum 20% of the value of an existing property as a deposit, the requirement is less for newly built homes, this is why you could secure a new Signature Home with less deposit than if you were to purchase an existing property.
Depending on the price of the new home or house and land package, and the region, there are many KiwiSaver advantages to building a new home as opposed to buying a an exisitng home. This includes the ability to use some ofyour KiwiSaver for your deposit, and potential access to a KiwiSaver HomeStart Grant .
Building From 5% Deposit
For more information on Construction Finance and Building you Home with as little as 5% Deposit order our "Building with a 5% Deposit" brochure and we will send you a physical or electronic copy.
NewBuild Finance Brokers
NewBuild Finance is a preferred supplier of Signature Homes and offers a solution funded by a bank at bank rates, and can fund up to 95% of the finance required to build a new home*. The client can then settle the loan up front (with their deposit paid on the land). No further repayments need to be made on the loan until the new home is built. Banks often won’t use equity from an existing home to fund a new home loan. This doesn’t work for clients who want to keep their current home as an investment, or keep it long enough to avoid needing to move their family twice. NewBuild is able to treat the existing home as a rental, and can fund up to 100% of the land and build using only equity in the existing home.
Also, with NewBuild any rental income on the existing home can immediately be used to offset the loan. The NewBuild approach also allows an investment property to be 100% geared for tax purposes. Banks are normally unable to do this for a new home.
Do you qualify?
Use NewBuild's quick and easy Loan Qualifying Calculator to see if you qualify for Construction Finance to build your new home.
What NewBuild offers:
- A standard bank loan through Sovereign/ASB
- 15 years experience in the new home loan sector.
- Lending criteria unique to NewBuild. This specialised approach helps more clients get approval to build a new home.
- Lower deposit builds on a case-by-case basis, with as little as 5% deposit* over house and land (we can also use equity in an existing house).
- If you own a home and want to retain it as an investment, or retain it long enough to start your build (so you only have to move once), you may be able to use your home as security and fund 100% of your land and build.
- A fully managed construction loan, taking much of the stress of building away.
- Unlike most banks, who require you to pay as much as several thousand dollars in valuation fees, NewBuild charges a one off fee to fully “project manage” the financial aspects of your loan for $1,000. This makes your building loan less expensive in most cases.
- You will have the option of not making construction loan interest payments until your home is completed, so you don’t have to pay rent and a construction loan at the same time. Your interest rates can be negotiated on completion, and Sovereign will often contribute to your legal costs.
- You will have additional funding set aside to cover unexpected costs along the way, but whatever funds you don’t use become yours at the end of your build to do with as you wish. These options could include buying new furniture, or reducing your loan.
Most of the major banks also have Construction Finance or Building Loan Solutions, and have more information available on their websites:
*Lending Terms and Conditions apply