The Value of Independence

Since 1999, NewBuild has exclusively managed construction loans and our wealth of experience is unmatched. Importantly, our independence from the bank means we are here to look after you, so we will provide the right advice around loan structure, and ensure your loan is properly managed.  For example, some banks will automatically pay on a builder's invoice without even checking to see if the work is competed. This puts you at risk of paying too much, or worse, if your builder goes under you will have overpaid for the works completed.

Additionally, we are independent of builders and we are not owned by a building company. It would be hard to tell who was on your side if things went wrong with your builder or your loan if your finance was through a company owned by your builder (and conflicts often exist between the build contract and the loan agreement).   

NewBuild’s lending criteria

Many clients go to their bank and seek a loan approval, not fully aware that an approval to purchase may not be interchangeable with an offer to build (most banks will approve a higher loan amount to purchase a used home than to build a new home).

The primary reason for the difference in loans is that building almost always has an “overlap.” You must qualify for the new mortgage as well as pay rent elsewhere. This can limit or even prevent you from qualifying to build. NewBuild overcomes this issue, allowing you to secure a loan offer at the same level – whether you are buying used or building.

NewBuild manages risk

A construction loan by its nature has more things that can go wrong, so NewBuild is about managing and mitigating risk. As a result of our experience, our lender is more willing to approve your construction loan through NewBuild because the risk to the lender and purchaser is properly managed. We manage the contract to ensure it aligns with the lender's requirements for deposit, the progress claims, guarantee, and appropriate insurances on the property while you are building.

NewBuild’s approval process

In nearly all instances, we recommend a two-step approval process. This is useful so you know well in advance just how much you can afford:

1. Pre-approval (also called credit approval or conditional approval). This is where the lender determines from your application how much money you can qualify for based on your income, your deposit, your credit, and other factors. It’s like knowing how big your sand pit will be before you buy the toys.
   
   
2. Security approval. That usually takes a little longer and is the process of finding a section, securing a build contract and getting the proposed property valued. This can take several months. But it’s important that while you go through this process you and your builder understand that your pre-approval is usually only valid for 60 days. So if you take longer to get the security approval and settle, you will likely need to renew and update your loan offer.

This sounds simple enough, but if you are starting to commit unconditionally to your land purchase and to your builder, and your offer expires, you run the risk of the lender's guidelines having changed, interest rates changing, or even your personal circumstances changing – all affecting a renewed loan offer.

Lastly, credit criteria are subject to change, so make sure as you progress through to an unconditional approval that your loan conditions are fully satisfied. Examples of things to watch for may include ensuring your builder can provide a third party guarantee, is willing to accept the conditions of progress payments, and even accepts the deposit criteria.