Financing your home build

If you have chosen to build a new home rather than buy, you are on a path a little less common but nonetheless exciting.

While this process allows for a greater degree of control and personalisation in your final result, it is important to be aware of the financial differences associated with home building.

At the outset of your home build, you may wish to seek financial advice and establish a realistic budget that you can and will adhere to.

Always factor in additional costs and expect overruns. Construction timelines are often off the mark, due to paperwork hold-ups, weather interruptions and so on. It is for these reasons that you should remember to factor in the costs of renting another home in the interim and two sets of moving expenses. Always overestimate your requirements!

You will then need to apply for a new home construction loan, which has a different application process from a traditional home loan. More documentation is required – for example, building contracts will be needed.

Your personal mortgage adviser may be able to help you discern between different lenders and loan products. As offerings and application requirements differ greatly, it is important to speak to someone who has a firm grasp on the construction loan market.

Perhaps the most vital aspect to remember about any new construction loan is that the money must be accessible as you need it, so that you can cover costs as they come up.

Once your loan application has been made, the amount for which you apply cannot be changed. If there are major overages, then it is you who will be meeting the costs.

As with any major financial commitments, thoughtful planning and targeted advice can go a long way towards success.