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 existing home. This includes the ability to use some of your KiwiSaver for your deposit, and potential access to a KiwiSaver HomeStart Grant.
There are many options available to you when you are considering building new and it is important for you to choose a company or bank that understands the construction process, and can work with you through the process. We have a number of relationships with companies that can help you and most of the major banks also have Construction Finance solutions.