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Building your dream home or doing major renovations?

We’ve all heard those horror stories of building projects going over time and over budget. With the cost of materials and labour on the rise, it’s enough to make anyone nervous about starting a project. But don’t let it discourage you from building your dream home or tackling major renovations. It’s important to figure out your borrowing limits and have a contingency plan in case of unexpected costs.

That’s where we can help. Together, we can create a solid mortgage strategy to alleviate any financial concerns, so you can focus on the fun and exciting parts of your project.

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Determining your Construction Budget

The loan you take out for your construction project depends on several factors:

  • Your overall financial position
  • Cost of the project
  • The nature of your projects (e.g., family home or investment property)

As a general rule, it’s a good aim to have 20% deposit on the construction cost. In specific situations, low equity options may be available. Depending on the amount you plan to borrow, you may need to provide a valuation.

Before starting your building project, consult with a Twine adviser to determine your borrowing capacity. Given construction projects often extend beyond the initial timeline and budget, having an independent adviser by your side is crucial for monitoring your budget and ensuring you can complete the project.

Determine your construction budget
Building

Choosing the right loan for your build

Construction loans differ from traditional home loans. Instead of borrowing the entire amount upfront, you draw down funds as the builder invoices you for completed work. This approach means you only pay interest on the drawn-down amount, not the entire loan, leading to significant interest savings. Principal payments start after the project’s completion. This differs from Turnkey or off-the-plan purchases, which is a standard home loan.

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Navigating the Building Process

Before the Build

To secure a pre-approval for your project, we’ll need to review:

  • Sale & Purchase Agreement if you’re purchasing land
  • A Registered Valuation of the finished house, based on the project plans
  • A signed contract with your builder
  • Builder’s information and an insurance certificate
  • Approved Resource Consent or Building Consent

During the Build

You’ll make payments based on the payment schedule in your building contract. At each draw down, the lender may require:

  • Invoice for the work completed
  • Photos/videos or an independent certification that the work invoices has been completed
  • Periodic registered valuations as the project progresses

After the Build

Once construction is complete, the lender may need to review:

  • Invoices still to be paid
  • Code of Compliance Certificate (CCC)
  • Registered Valuation upon completion

Ready to build your dream home?

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At Twine, we believe that mortgages are valuable financial tools that require strategic management and advice to be used effectively. With the right approach, a mortgage can be leveraged to grow equity & wealth for you and your family.

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