Navigating Building Finance for Your Dream Home with Gubb Design
Securing finance for your new home construction is a completely different ballgame compared to buying an existing property. With a myriad of complexities involved, working with someone who thoroughly understands building finance is essential. Generally, costs for building work vary widely Nz building economists 2024 suggest a basic house costs around $2,760 excl gst per square metre and a medium quality single storey around $3,350 excl gst.
Laying the Financial Foundation
The best time to begin organising your building finance is at the very onset when you start considering building as a viable option. Initially, you might not have a clear picture of what the project will cost, but starting the financial discussion early can help shape those dreams into reality.
Begin by evaluating what you can afford. Consult your bank about your borrowing capacity based on potential mortgage repayments. Once you have a financial framework, you can collaborate with your designer to align your project within your financial parameters.
Creating Your Budget
Building a home demands rigorous planning, and establishing a precise budget is crucial. Consider whether it makes more financial sense to renovate or invest in a move. Many dream of million-dollar homes, but finding a balance between aspirations and financial reality is key.
Explore our Budget Worksheet to help guide your decisions. Minimising changes in design and materials is advisable, as any deviation can lead to increased costs. Additionally, setting aside at least 10% for unforeseen expenses or changes in the plan is wise—better to be over-prepared than underfunded.
Financing Methods
Typically, many people finance their building projects by borrowing against the current value of their property or the anticipated value post-construction. Whether opting for a new build or renovation, obtaining a valuation before approaching lenders is crucial to understanding your equity.
While working on your financial setup, engage in comprehensive discussions with mortgage providers and consider using a specialised mortgage broker to explore diverse options, terms, and conditions that favour your financial situation.
Building Finance: Side Notes
Loan Types: Choose between table loans, which gradually repay the principal, or interest-only loans, which initially lower payments by only covering interest.
Negotiating Terms: Even in new builds, mortgages can be negotiated. Compare interest rates, explore cash-back offers, and other incentives with the help of a seasoned broker.
Progress Payments: Funds are typically released in stages, with payments tied to work completion. Make sure progress payments correspond to the house’s value at each stage.
Mitigating Financial Risk
Escrow Solutions: Underutilised but beneficial, escrow accounts safeguard both the homeowner and the builder. Payments remain secure until work completion is confirmed to satisfaction.
Insurance Essentials: Never underestimate the power of contract works insurance—protect your investment from the unpredictable.
Third-Party Guarantees: These serve as a safety net should your builder be unavailable to correct any issues. More mortgage providers now require such guarantees.
Building finance can be daunting, yet with the right preparation and guidance, you can navigate this complex landscape confidently. Gubb Design is here to support you with insights into making informed financial decisions, ensuring your dream home becomes a reality without unnecessary stress or financial pitfalls. Get in contact with us today.