“Home wasn’t built in a day!”
Jane Sherwood Ace
Building your first home in the Toowoomba Region can be super-exciting, and with any new project there is much to learn! Here are a few things to consider when looking how to fund a purchase for your brand-new build.
1. Your financier provides “progress payments”
While the application process for a construction loan is similar to a loan for an existing build purchase, the loan is funded quite differently. Rather than a lump sum paid to a seller at the time of settlement, you will require finance to be drawn down in specific portions over several stages of your new home construction which can include:
- Land purchase
- Builder’s initial deposit
- Progress payments to builder (dependent on contract; usually five payments over the course of the build)
It is also worth noting that the length of build can impact when the loan is drawn down in full. Some construction may be completed in as little as three months from start until “tools-down”, while others we have seen take more than a year to reach completion!
(It’s important to note that these delays are currently taking longer with the recent building supply shortage, so please note the current climate of the building industry – there are other factors that may affect your timeline)
2. Read your builder’s contract thoroughly and ask a lot of questions!
One area we recommend asking a lot of questions about is product choice flexibility. Your builder will have set a certain budget from which you source products from. This can include anything from light fittings to plumbing to flooring. You may wish to purchase something beyond the budget the builder set, so if you have your heart set on a certain product, make sure you let your builder know to include this in the budget before you sign your contract. Any blowouts for items you choose beyond the stipulated budget will become your responsibility to fund.
3. Make selections in line with your contract conditions.
Across the Darling Downs and Toowoomba region there are many local businesses that you may be inclined to support when building a new home, however your builder will have their own preferred suppliers. Making selections outside of these relationships can make things complicated for you if you require loan funds to complete these purchases (e.g.: an alternate flooring supplier).
This is because your lender makes progress payments, according to your builder’s construction contract, directly to your builder. In some cases, a lender may consider a variation in the builder’s contract to draw down your loan to pay a third-party supplier, however both the lender and builder may charge you fees for this variation. Should the lender deny your request for variation, you may be left to draw from your own pocket to pay the supplier’s bill.
Still want to use an alternate supplier in your build? Make this a stipulation in the contract PRIOR to signing with your builder and submitting to your financier.
4. It is the home of my dreams – but how much is too much to borrow?
The temptation with a new build is to stretch the lending to the maximum of your capacity to build your ideal home. While lenders can provide online borrowing calculators, they rarely reflect the actuality of your unique, nuanced, financial situation. At Real Choice Finance we understand the emotional pull of a new home, and we can also weigh this against the reality of your financial obligations. We are here to help you weigh the options; we do not want to see you saddled with a daily dinner of two-minute noodles as a result of over stretched finances!
If you have any questions regarding your loan capacity or are just feeling unsure how to proceed please reach out, we’d love to help you. Our team have over four decades of experience helping people into their dreams of home ownership! We would love to help you too!
DISCLAIMER: “While parts of this article can translate for some situations with buying a home in Australia, this opinion piece is in the context of the Toowoomba Home Market. We cannot give blanket advice on loans that require tailoring to the individual’s circumstances. Please contact our team and we can help you find out how to get those finances healthy and ready to get into your very own home.”