For many, building a home is too daunting a thought. However for some first home buyers, building their own home is the stuff dreams are made of. If it’s something you’re thinking about, take some time to consider a few important points.
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As with most projects, effective planning is needed, and the way to get the best result is to think everything through in a clear, logical sequence.
Remember - do your homework and read all your paperwork carefully. And don’t be afraid to ask your builder and lender all the questions you need to fully understand every detail.
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How much can you borrow?
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Be very clear about this before you buy land. Your home loan lender can help you work out what you need, clearly outlining the costs you will face. Check out 'How much can you afford to borrow calculator?'
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Finding your home and land
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Factors such as distance to family, work, transport, schools, medical facilities, shopping and entertainment and recreation areas should be considered. Think about your lifestyle and requirements carefully and prioritise what is important to you.
If buying a house-and-land package, make sure that the home suits the land and is in keeping with the area.
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Choosing a builder and negotiating
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Ask for references from current and past customers and follow them up thoroughly.
Make sure your builder is a member of housing industry or master builder’s associations. They have access to a wide range of information, services, plain language contracts and supporting documents.
It is essential to obtain quotes in writing and ask plenty of questions. Make sure you feel comfortable with your builder and that that he knows exactly what you expect. Discuss special requirements and considerations early in the process.
A building contract usually contains processes for managing disputes and delays and clear details of completion stages and progress payments required. Be sure to get independent advice before entering a contract.
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Securing your finance
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In addition to the requirements for a standard home loan, you will also need to provide the builder’s licence and contact details, payment and insurance information, tenders, plans, specifications and a copy of the building contract.
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Getting ready to build
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Many lenders will allow you to settle the land purchase before construction begins.
Once you’ve provided the supporting documentation, your lender will normally issue an Authority to Commence Construction — the permission your builder needs to start work.
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Your progress payments
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Your lender usually makes progress payments to your builder according to the stages set out in your contract. You will need to complete a form, signed by you and the builder, verifying that the works have been checked and completed to your satisfaction. Your lender may sometimes conduct a valuation prior to making progress payments.
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Completion: time to move in!
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It’s vital that you thoroughly inspect the quality of work and resolve any issues with your builder before you consider it completed and allow the final payment to be made.
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