{"id":21357,"date":"2021-08-16T15:40:43","date_gmt":"2021-08-16T05:40:43","guid":{"rendered":"https:\/\/www.purefinance.com.au\/?p=21357"},"modified":"2021-09-15T18:18:50","modified_gmt":"2021-09-15T08:18:50","slug":"a-guide-to-building-your-own-home","status":"publish","type":"post","link":"https:\/\/www.purefinance.com.au\/a-guide-to-building-your-own-home\/","title":{"rendered":"Building your own home? Here\u2019s what to consider"},"content":{"rendered":"\n

There\u2019s a lot to think about when buying a home. Do you want to live close to the city or head out of town? Are you looking for a low-maintenance apartment or a bit more space and even a backyard? How many rooms, bathrooms, and car spaces do you need? What about the design and interiors of the property itself? <\/p>\n\n\n\n

With such a specific list of boxes to tick, it might make sense to build the property of your dreams instead. There\u2019s a bunch of reasons why building a home can be an attractive option: the control and flexibility to design your home from the ground-up plus the appeal of stepping into a brand-new home (without the need for immediate maintenance and repairs). <\/p>\n\n\n\n

But there\u2019s also the less glamorous side to building your own home, including understanding the costs of construction, finding a reputable builder, and navigating the complexities of building contracts. To help you wade through this sea of information, we\u2019ve put together a guide to everything you need to weigh up when building a home. <\/p>\n\n\n\n

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So, how does it work?<\/h2>\n\n\n\n

As you\u2019d expect, building a home from the ground up, or making structural changes to an existing dwelling is a pretty significant undertaking. With this in mind, lenders typically like to make sure that you have all of your ducks in a row before setting out on your construction project (or major renos) by way of a fixed-price building contract from a licenced builder. Chances are you\u2019ll also require council approval for your plans, so make sure you get that sorted early too.<\/p>\n\n\n\n

With construction loans, just like traditional home loans, the bank relies on loan to value ratios (LVR\u2019s) when determining how much they will lend for the build. And, just like traditional home loans, lender\u2019s will generally allow you to borrow up to 95% of the completed value of the property.<\/strong> For example, if you were to purchase a block of land that costs $400k and have a fixed price building contract for $300k, the bank would lend against the estimated completed value of $700k.<\/p>\n\n\n\n

The main difference between a traditional home loan and a construction loan is that the former is a little bit more \u2018hands off\u2019, while the latter typically allows for interest only repayments and the gradual disbursement of the loan to minimise outgoing costs and increase cash flow during the construction period. Once the construction is complete (which usually has to be within 12-24 months) the loan product will revert to a traditional home loan for the remainder of its duration. <\/p>\n\n\n\n

Speaking of repayments, it\u2019s important to factor in the costs of living elsewhere (e.g. rent) during the build, while also budgeting for the interest only repayments on your construction loan.<\/p>\n\n\n\n

During construction, the bank will typically release funds directly to your builder in 5 stages. These main payment stages include:<\/p>\n\n\n\n

  1. Slab or base stage: covers the cost of laying the foundations of your home, along with plumbing and waterproofing.<\/li>
  2. Frame stage: covers the cost of the house frame, roof, and windows.<\/li>
  3. Lockup stage: covers the cost of any brickwork and external doors. <\/li>
  4. Fixing or fit-out stage: covers the cost of internal walls, woods, fittings and fixtures (such as cupboards), electrical work (such as lights and powerpoints) plus internal plumbing (such as toilet and bathroom fittings).<\/li>
  5. Completion stage: covers the costs of finalising the build, including walls and ceilings, painting, fitting electrical appliances plus the final and clean prior to move-in. <\/li><\/ol>\n\n\n\n
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    Should you consider the owner-builder approach?<\/h2>\n\n\n\n

    So, you\u2019ve watched a few seasons of The Block<\/em> and you\u2019re ready to strap on the overalls and start laying some bricks. Before you commit to the DIY approach it\u2019s important to think about the impact this will have on your build. <\/p>\n\n\n\n

    While being an owner-builder can slash your costs by up to a third<\/a> (as you won\u2019t need to pay the Registered Builder\u2019s Fee), most lenders are reluctant to finance owner-builder projects and prefer home builders to engage a licensed builder<\/a> to get the job done. Plus, there are other important factors to consider including:<\/p>\n\n\n\n