If you want to build your dream home in New Zealand, a common way to pay for it is to get a construction loan. But there are some common mistakes you should avoid if you want the loan process and home build to go well. So we’ve put together some tips right here to help you avoid making these mistakes, get the most out of your building loan and most importantly, have a great build experience.
1. Plan in Detail
You need a detailed plan for your building project before you can ask for a construction loan. You will also need to provide evidence of your income, debts, outgoings and financial stability. Something else we recommend you think through is to also have a budget in mind that is reasonable and takes into account any unexpected costs that come up. A well-thought-out plan can help you get the loan you need and keep you from being surprised while the home is being built.
2. Choose the Right Lender
It’s important to get a building loan from the right lender. Finding a reputable broker or someone who has worked with construction loans before and knows the ins and outs of building and financing a build in New Zealand is a good start. You should also compare different lenders’ interest rates and loan terms to make sure you get the best deal. This is why we recommend working with a mortgage broker that can do this for you in accordance with your situation.
3. Get Pre-Approval
Getting your building loan pre-approved can help you set a budget and give you a better idea of what you can afford. It also tells potential lenders that your project is important to you and that you have a plan. This can help you get a loan and move the loan process along faster.
4. Understand the Loan Terms and Conditions
It’s important to read and understand your building loan’s terms and conditions. This includes the interest rate, the plan for paying back the loan, and any fees or charges that come with it. Before you sign the loan deal, make sure you ask questions and clear up anything you don’t understand.
5. Budget Realistically
It’s important to be realistic when making a budget for your building job. You should think about all costs, such as materials, labour, and any other costs that may come up unexpectedly during building. A realistic budget can help you avoid money problems and make sure that your building job is finished on time and on budget.
6. Have Enough Insurance
For your building job, it’s important to have enough insurance. This includes insurance for the building materials, labour, and any other costs related to the job. If you have enough insurance, you won’t have to pay for costs you didn’t expect, and your building project will still get done, even if there’s an accident or something else out of your control.
7. Monitor the Construction Progress
As the building process goes on, it’s important to keep an eye on things to make sure everything is going as planned. If you talk to the builder and the banker on a regular basis, you can catch any problems or delays early and fix them before they get worse.
8. Avoid Overbuilding
With construction debt, it’s easy to make the mistake of building too much. It’s important to build a home that fits your wants and your budget, instead of trying to make a fancy house that you can’t afford. Overbuilding can cause money problems and delays, and you might not even be able to get a loan in the first place.
9. Understand the Risks
Construction projects always have risks, such as delays, price increases, and problems that were not expected. It’s important to know about these risks and have a plan for what to do if they arise. This can mean setting aside extra money or making plans for what to do if there are delays or problems with the building.
Construction loans can be a great way to get money for your building job. But it’s important to avoid these common mistakes if you want your loan application and build to go well. By making a realistic budget, choosing the right builder, knowing the loan terms, and having a backup plan, you can avoid making mistakes that will cost you a lot of money and have a successful experience on your home construction project.
Stonewood Homes can help you get a building loan so you can build your dream home. We have teamed up with NewBuild, the experts in home construction lending. Our specialist lending partners at NewBuild can help you find the right loan for you and are dedicated to providing excellent customer service. Contact us today to find out more. We encourage you to use our online lending calculator to explore just how easy it may be to start the process of building your new dream home.