House & Land – Construction

Are you dreaming of building your own home or investing in a house and land package? At EMC Finance, we understand the appeal of purchasing brand-new properties and are here to guide you through the financing process.

When it comes to house & land construction versus off-the-plan purchases, the financing approach varies. Here’s what you need to know:

Off-the-plan or turn-key properties involve a completed build. The normal finance process works as followed:

• A deposit is paid upfront to secure the property.
• Finance arrangements are finalized closer to completion.

Since lenders cannot approve loans for properties without a title – certificate of occupancy, formal finance approval is deferred until:

1. The property is complete.
2. The title is ready to be transferred to your name.

In these cases, your financial position will need to be reassessed closer to settlement. Depending on the project this can vary on when completion occurs and it is essential to plan ahead and evaluate:

• Market Trends: Will the property maintain or increase its value?
• Financial Position: Will you be in a similar or better financial state when settlement occurs?

If the market appreciates during construction, you may gain equity by the time of settlement, which can be advantageous for your financing. However this can also work in reverse and the valuation decrease while seeking formal finance approval, meaning further contribution or potential higher interest rates and fees.

Construction loans can be either a standalone loan or combined with your land purchase financing. As with off-the-plan purchases, land cannot be valued until the title/ land has been pegged available for settlement, which also means construction financing cannot proceed until this point. Even though finance may not be available when signing the contract, it is important to understand your finance position when signing.

Typically, construction loans are structured around a fixed-price building contract provided by a licensed builder. Here’s how they work:

The loan is drawn down progressively as the builder completes each stage of construction:

1. Deposit
2. Base stage
3. Frame stage
4. Lock-up stage
5. Fixtures and fittings stage
6. Completion

Lenders generally require specific percentages to be paid at each stage to minimize risk.

While the fixed-price building contract covers much of the construction, lenders will often ask for clarity on how you plan to fund additional expenses, including:

• Driveways
• Landscaping
• Fencing
• Window furnishings

It’s essential to include these costs in your budget to avoid any delays.

Timing is critical for construction loans and off-the-plan purchases. Delays are common and can extend project timelines significantly. To ensure you’re prepared:

• Assess Your Future Plans: Consider your work, savings, and lifestyle goals.
• Plan for Contingencies: Account for potential delays and unforeseen expenses or valuations.

At EMC Finance, we work closely with you to understand your long-term goals and help you navigate the complexities of financing.

Let EMC Finance assess your situation and provide you the finance options for your dream home or investment to life.