Securing Finance For Your New Home
One of the first and most important things to consider when taking the leap and building a new home is your budget.
The team at Stroud Homes Tamworth is doing its utmost to give you all the costs up front so when you go back to your bank to apply for a home loan, you’ll know exactly what you’re in for.
We speak to Tamworth local Mortgage Broker, Matthew Davies, on what else is important to take into account before you commence your build.
This will depend on if you have already purchased the land or if you are purchasing the land at the same time as your build.
If you are purchasing the land at the same time as your build, things that you would need to budget for would include:
If you already own the land some things that you need to be wary of is the banks progress payment fees. During your construction, the bank will pay your building in stages. There will typically be five or six stages and your bank will likely charge a progress payment fee per stage paid.
It’s also a really good idea to try and have some savings up your sleeve for when the build is complete.
Throughout the build you might indulge a little and upgrade a few things here and there which add to the costs. This may mean that at the end of the build you may owe more than what the bank has approved. If this is the case you will need to foot the bill out of your own savings.
Don’t forget that while you are only paying the interest on what has been paid out so far, you still need somewhere to live until you get the keys so it’s important to make sure you can maintain your existing rental or mortgage payments.
The best way forward is to get in touch with us. We will talk through your requirements and go through your details with you so we can find a lender that is:
Be prepared to have your financial life examined by the banks. The banks want to know where you have lived and worked for at least the last three years.
They will want to know what assets you have accumulated, detailed information about your current liabilities and in-depth details on your ongoing expenses including things like education, groceries, utilities, motor vehicle expenses among other things.
You will also need to be willing and able to produce bank statements from all of your bank accounts evidencing your liabilities and expenses.
There are a few different levels of pre-approval and they differ between which lender that you choose.
There is a fully assessed pre-approval which means that the bank fully assesses the application as if you have already settled on a plan. They will assess your income, make sure you have the funds available to complete the transaction, check your credit file and complete all their other checks.
Once complete, the bank will issue the pre-approval pending that the security that you choose is suitable to the lender.
The other type of pre-approval is a computer-generated approval. This approval is only as good as the information that is input. This type of approval hasn’t had an assessor check your income documents, check your statements etc.
All of this information will need to be checked by the assessors once you find a plan that you settle on.
If you don’t have a 20% deposit the lender will require you pay an insurance fee called Lenders Mortgage Insurance. This insurance is only to protect the bank in the case that you default on your mortgage.
If you default on your mortgage and the bank must sell your home, if they can’t recoup enough from the sale to cover your existing mortgage, legal expenses, lost interest and other fees and charges, they will claim on the insurance to make up the shortfall.
LMI shouldn’t be confused with Loan Protection, which is the insurance that you should take out with your mortgage in case of death, terminal or serious illness.
There are a few ways to apply for the first home owner’s grant. You can apply yourself and have the funds directly put into your account.
However, if you need the first home owners grant to form part of your contribution the easiest way to apply is through the lender.
As part of our process we help the client with the application and submission through the lenders to make sure that the funds are available in time for settlement of your land purchase or the commencement of your build.
A construction loan is a loan where the bank will control the funds and pay the builder in stages.
You will then pay only the interest on the amount that has been drawn down. For example, if your deposit to the builder is $20,000 you will pay only the interest on $20,000 and so on until the build is finished.
The bank will typically pay in six stages:
Once the final payment is made the loan will typically revert back to principle and interest payments.
The simple answer to this is No!
The lenders will want to see that you have the funds saved to pay the deposit and the costs which include solicitors fee and stamp duty.
There are definitely some risks in doing so. It will ultimately depend on what the fees and charges will be for pulling out of the purchase.
With the land purchase, once you exchange contracts with the vendor, you are legally obliged to complete the purchase.
Pulling out after exchanging contracts means that you may lose your entire deposit. This may be similar with your builder and you should always check on what you may loose should you pull out of the transaction.
Aussie Home Loans Tamworth is a family run business that has been in operation for a little over three years. The company is built on delivering great customer outcomes and believes that everyone deserves the best shot at becoming a home-owner.
The home loan process can be a stressful one and the Aussie team aims to be able to educate clients on the process to try and take some of that stress away.