Once you have decided to buy or build, the next step is deciding on a budget. Looking at a home loan, it is important to note that banks generally do not offer more than an 80% loan. Therefore, one must have at least 10-20% of the purchase price before approaching a bank for a loan. Banks do sometimes offer a loan of the full purchase price, but this is rare and the interest rate implications are very high. Please note that when purchasing a home, it is the seller’s responsibility to ensure that the municipal rates and taxes are paid up to date and all the necessary must be produced.
It is important to note that with building loans, banks are reluctant to offer more than 70% of the cost of the contract. The purchase price can comprise the land and cost of building. If the land is paid in full, this can be used as security for a loan for the cost of building. Before one is able to secure a building loan, plans must be presented along with at least three quotes from a reputable building contractor (the building contractor must present proof of all risk insurance cover, and NHBRC enrolment certificates), an engineers report is most often required – this can be obtained through the contractor, the design professional, or directly from an certified structural engineer. Coupled with this, one must present a comprehensive document outlining how and when the building contractor will be paid.
We can assist and refer you to a bond originator that specialises in securing loans from a range of financial institutions. Contact us today!