Building your home can be a confusing process, especially if this is your first time! We've outlined some helpful tips to get you started including the construction loan process, upfront costs you might encounter when building and Government Grants that could be available for you to take advantage of. However, if you prefer talking to someone face-to-face or over the phone, our Lending Consultants are always here to help you through to process.
The first step to building your home or investment property is to determine your budget and start arranging for necessary finance. To determine your budget Auswide Bank can assist you in assessing your serviceability for a loan and advise you of the maximum amount that you can borrow. To be more confident about your budget you can apply for a pre-approval with us, which takes into account your income, monthly expenses and your credit report.
Pre-Approvals are subject to an acceptable security, which in this case is the house you are building, and may speed up the final approval process once you have signed your building contract.
The block of land you choose may determine the style or design of the house you can build. Things to consider are:
- Slope or fall of the block
If the block has a significant slope it may need to be levelled, otherwise you will be required to pick a design that takes the slope into account. - Easements
An easement is a section of land on the title which can be used for a specific purpose by someone, even though they are not the land owner - Essential Services
Are services such as water, electricity, telephone, broadband internet/NBN, gas and sewage available in the area, or will you require extra inclusions such as an onsite septic treatment system? - Location
Is it subject to flooding, bush fires or high winds/ cyclones?
Or is the land close to commercial estates, busy roads, airports or railway lines?
Selecting a builder is one of the most important decisions to make when building. There are many things to consider such as:
- Experience
- Price
- Inclusions
- Quality
- Their suppliers and subcontractors
Visit some display homes and decide on the style of home that you would like to build and what you would like it to include, such as:
- Number of bedrooms
- Number of bathrooms
- How many garage spaces
- Single story or double story
- Pools, landscaping, fencing and gardens
Don’t forget to review your inclusions thoroughly. If you have requested multiple quotes, compare each builder’s inclusions and be sure to know what you are getting for the price you are paying. Download our Home Building Checklist to track your budget and compare quotes.
Once you have selected your builder, you will then be required to sign a building contract.
Along with the standard supporting documents required for an Auswide Bank home loan, which you may have already provided if you obtained a Pre-Approval, we will also require the following before providing a decision:
- Signed Contract to Build
- Signed Purchase Contract, if applicable
- Copy of Proposed Building Plans
- Detailed Building Specifications
- Original First Home Owners Grant Application, if applicable
The contract, building plans and detailed specifications will be supplied to one of our Valuers in your region to value your proposed home to obtain the estimated value of the property once the build has been completed.
After you have returned your signed loan contract and all settlement conditions have been met, settlement will be booked. The date of settlement will depend on other parties if you are purchasing your land in the same transaction, otherwise, if you already own your land settlement will occur upon receiving all construction requirements and the invoice for the first progress payment.
Please note, we will advise you and your builder when they can commence construction. This letter must be issued by Auswide Bank prior to the release of any funds.
The construction process can vary slightly between states and builders. Generally there are 6 main stages to a construction process:
- Deposit stage: The deposit is paid to the builder to initiate the build.
- Base or slab stage: The stage of the works when the concrete footings, base brickwork and/or stumps are complete.
- Frame stage: The stage of the works when the building’s frame is complete.
- Lock-up or enclosed stage: The stage of the works when all roofing, brickwork, cladding, structural flooring, external windows and external doors are fitted and complete.
- Fixing stage: The stage of the works when all internal fixings are complete, such as: walls, plaster, architraves, skirtings, doors, baths, showers, wet area tiling, built in shelves, cabinets and cupboards, plumbing and electrical.
- Practical completion: When all work is completed in compliance with the contract, plans and specifications.
Once each stage is complete your builder will provide you with an invoice which is to be provided to us to pay the builder, this is called a ‘Progress Payment’. Please review our ‘All you need to know about Progress Payments’ guide that will be supplied to you with your loan documents, or can be accessed here.
While your home is being built, you may be lucky enough to live with family. If this is not the case you may need to rent while your new home is being built.
Before any building starts, your property will need to have the soil tested, which largely ensures there aren't any conditions that might damage your house down the track.
Another test you will generally need is a contour test that surveys the land and gives details as to the slope of the property. Depending on the slope, building plans for the property might need to be adjusted.
Site costs are unavoidable when building a home and help prepare the land for a stable foundation. Costs will often include levelling of the building pad, drainage, retaining walls and tree roots.
Lenders Mortgage Insurance is a one-off premium that you can pay upfront or as part of your loan and is designed to give those with a lower deposit an opportunity to buy a property.
Essentially, LMI protects the lender if you are unable to pay for your loan in the future and is calculated based on the size of your deposit and how much you need to borrow. The best way to avoid paying LMI is to have a deposit of at least 20% of the property purchase price.
A loan application or establishment fee is a one-off payment per application, which may also include a valuation fee.
When buying or selling a home, a conveyancer or solicitor will arrange documentation for your sale or purchase. Often this includes preparation of the contract, title searches and organising settlement costs.
A mortgage registration fee is a government fee paid during settlement when a mortgage is established (buyer) or when the mortgage is discharged against the property (seller). The fee register’s the physical property as the security on the home loan, allowing any future buyers to check claims that may exist on the home.
A transfer fee, also required by the state government, covers the transfer of title of the property from one party to another.
Stamp duty, sometimes called transfer duty, is a tax charged by the state government when buying land or transferring to a new owner. It’s one of the more expensive costs you will incur outside of the property purchase price and the amount paid can vary greatly depending on the price of the property and which state or territory you live in. If you’re a first-time home buyer, you may be eligible for stamp duty exemptions or concessions which can significantly reduce the cost.
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