At a Glance
Professional Construction Loan "Project Management"
NewBuild is like your "Finance Project Managers" when you decide to build a new home. NewBuild will take you from loan application to managing your progress payment through to completion of your new home. Using a mainstream lender at very competitive interest rates, NewBuild can be significantly less expensive as we do not require multiple valuations throughout your build. From loan approval to hand over of your finished home, the hassle is reduced, and risks around building minimised.
Flexible Lending Criteria
You may be approved with a smaller deposit than some banks require (*lending conditions apply and subject to change without notice). But most importantly, your loan offer to build may also be used if you choose to purchase a used home. Most banks lend substantially less for building - not NewBuild.
Reducing Risk
Building by its nature has an element of risk. But it can be mitigated through good management. The risk is managed for all parties.
For the client - by having the progress payments managed, and not having to worry about the details
For the builder - who knows how much they will be paid, and when
For the lender - who has certainty that the right amount of money is being paid, and that financial oversight of the project is enhanced through NewBuild.
Reduced Stress
Reduced Stress
One big problem with funding a build conventionally is the overlap in paying rent and a mortgage during the build. In a conventional progress payment loan you will need to pay rent and a construction loan at the same time. Most banks include your rent in servicing when determining how much you can borrow (even though it's only during the build) as if it were a liability against you, reducing how much you can afford.
Deferred Interest Payments While You Build (Interest Capitalisation)
Not only does including your mortgage interest inside the build loan reduce stress, it increases your affordability. There is a nominal compounding affect (interest being charged on the unpaid interest), but this will likely add only several hundred dollars to an average build - outweighed by the benefits listed above. This is optional in most instances, and if you want to pay your interest along the way, that is normally acceptable.
Additional Funds (Contingency and Owners Care Reserves)
These funds are added (optional) to cover unexpected costs necessary to complete your home up to 5% of your build contract, and funding for owners care (items you wish to complete yourself outside your build contract)
Significantly Less Cash Required Throughout The Build
Cash and cash flow both suffer during a typical build. You are normally required to pay all the interest as you go, as well as any variations to build costs, owners care work and your deposit. This can all add up, and may result in your loan being declined before you even start if you use a regular construction loan. Cash flow shortfalls may add to your stress, but this can be avoided by ensuring all your costs to build, including all costs over and above your land and base build contract, are included in your funding. NewBuild does this through Aquisition Price.
Turn-Key Solution
Turn-Key Solution
"Turn Key" is a term used to imply your are purchasing a fully completed brand new home without all the hassle in between. NewBuild is a turn key solution, but unlike some builders' turn key contracts, you will retain full ownership of the land, and your deposit is applied to the project. Plus the actual interest costs are transparent, and normally far less expensive than what the builder would have to add to your contract price to deliver a "turn key" home.
Flexible Progress Payments
Some builders need very few progress payments, some more, depending on the size of the build. You also need to be sure that each payment reflects the works in place, and not just what the builder may invoice. The detailed progress system allows flexibility while ensuring the correct level of payments are made. The payment amounts are predetermined so you do not need to spend thousands on extra valuations. A simple inspection ensures the work is in place and payments made from a QS (Quantity Survey) style schedule.
Cost Saving Systems
No need to pay for multiple progress valuations and solicitor's fees throughout the build. NewBuild charges $1000 to fully manage the construction loan, and we set aside an inspection reserve to cover building inspections at progress claim time. These costs may differ based on location of the property and the inspector's fees, but they are substantially less expensive than paying for so many valuations.
Asset Protection
Asset Protection
Reliance on third party guarantees to reduce exposure to loss of deposit and non-completion (Registered Master Builders or Certified Builders) are required for most, but not all building projects. From time to time, you may have sufficient deposit that the lender does not require a guarantee, although we always recommend you have an independant guarantee. Before you select your builder, you should find out if they can offer the Master Build Guarantee, or the HomeFirst Guarantee offered through Certified Builders. Check out their websites for more information about their respective guarantees.
Dispute Management
Sometimes you and your builder just can't agree an issue, so rather than let it get out of hand, which can often happen, NewBuild will provide reasoned assistance to both parties handling concerns and disputes.
Completion
Completion
When you build a home you need to ensure your home is fully completed. All lenders require a valuation (or a valuers completion certificate) and a council Code of Compliance Certificate (CCC). Before you sign your build contract you should ensure that the builder takes responsibility to provide a CCC, and that they also understand your lender may withhold the final payment until the valuer has sighted the home and deemed it complete in accordance with his/her original valuation. NewBuild manages this process vigorously as it protects both you and the lender, and ensures you have met a condition of the loan.
Competitive Permanent Finance Options
So you must be wondering, with all these benefits, there must be strings attached to interest rates. Many clients have asked just that. The answer is simply NO. If your loan application is successful, your loan will be with Sovereign Home Loans Limited (Wholly owned subsidiary of ASB Bank and Commonwealth Bank of Australia). Your interest rates will in fact be the published Sovereign rates less a NewBuild discount of 0.1% when you use a qualified NewBuild advisor.
Non-Bank Funding (specs, showhomes or non bankable loans)
Non-Bank Funding (specs, showhomes or non bankable loans)
In addition to Sovereign Home Loans, NewBuild offers funding through a non bank funder. These are beneficial for short term construction loans such as specs or show home builds. The management systems are similar, but fees and rates are higher, reflecting the additional risks that include no evidence of income, and includes inherent equity (equity that exists between the cost of the proposed project and the valuation). Most of this activity is tax deductable. Interest rates and fees are higher, and you should inquire about the costs and terms.