Construction Loan | Build Your Dream Home

Many people choose to buy an existing home for the benefit of time and money. However, there are a special few who prefer customisation over convenience. If you want to build your dream home, then a construction loan is designed to help you cover the costs associated with this type of project.

Understanding Construction Loans

A construction loan is very different from a regular home mortgage, especially in terms of coverage, borrower eligibility and payment conditions. It is specifically designed for people who plan to build a new home. It’s quite common to see Kiwis considering off the plan developments, so it’s vital to discuss your plans and intention when deciding on the right type of loan for you.

What does it mean to buy a home off-plan?

You are buying off the plan when you choose to buy an apartment, townhouse or free standing home based on an architectural plan that is yet to be constructed. You and the developer agree on a purchase price for the property, which is usually much less than what it is going to be worth after the project completion.

What different types of construction loans are available?

In New Zealand, you can find several types of construction loan covers, each having distinct attributes and payment structures.

Turnkey contract

This is a very simple and straightforward arrangement.

At the onset, you only need to pay a 10% deposit fee. The rest of the balance, will be due once the construction of the building has been completed. No progress payments needed. In addition, this is essentially a fixed price contract. 

Land and build contract

In this arrangement, the land is purchased separately and you have to pay for it once the land title is ready. Since the lender will release funds right away, interest payments will also start early.

For the building, you will be required to pay a deposit of 10% of the agreed price (i.e fixed price contract). Then as the construction goes, you will have to make progress payments at various stages of completion.

Labour-only contract

Also known as a partial contract, this type of arrangement is when the builder is only responsible for providing skilled work. You, as the owner, will have to manage the project and source the construction materials.

Since this type of loan is widely used for kitset and transportable homes, lenders would usually give a relatively lower loan amount equal to the land value of the property. In addition, you may have to pay a higher deposit amount.

What We Can Do For You

In case you are still wondering why it is wise to consult us. Here are a few reasons. 

Aside from working with major banks, we also have strong partnerships with non-traditional yet credible lending companies. We have a solid understanding of the construction industry because we underwent specialised training.

In addition, we will take the time to study your personal situation and can give personalised advice to questions like:

  • When is the best time to apply for a construction loan?
  • What type of construction loan would best address my needs? 
  • How much can I borrow? 
  • Will the bank release funds for landscaping and other minor finishing works?

If you wish to schedule a consultation, please contact us.

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