Building a new home

Your choice of a vacant stand to build on will be a critical factor in the bank’s decision for finance. Be sure to have written in the Offer to Purchase the Seller’s responsibility for establishing access to the stand. If you’re not buying your stand from a developer, the financial arrangements, legalities and procedures are basically the same as buying a house. Once your Home Loan has been approved, a letter of grant is issued informing you of the bank requirements and any conditions pertaining to the building loan. In some cases, the conditions must be adhered to as a prerequisite to the home loan being registered.

There are some specific factors you need to take into account:

The stand must be within the proclaimed suburb, if not it can take years to be proclaimed, check with local authority. Proclamation means that the local authority confers suburb as suburb status and will provide water, electricity, and sewerage, refuse collection and other essential services. Check for restrictions at the local authority.

The local authority must approve plans before an assessor assesses the building progress, in order to release the first progress payment. IMPORTANT: The bank requires a copy of the local authority, approved building plan, quotes from your builder and also proof that you have purchased the stand.

An assessor will assess the stand on which the building will be built to assess its stability, as security for the loan to be advanced. The assessor will then estimate, on behalf of the bank, the cost to complete the house, which will determine the maximum home loan that will be granted. The assessor will also ensure that the builder is registered with the NHBRC.

Design Changes

During building process, minor changes have to be made that has not been included in the original building plan or specifications. It is wise to provide for these contingencies in your budget.

Note: If the building plans have to be altered, the assessor must re-assess whether it is necessary to review the estimated cost.

It is vitally important, specifying exactly what types of finishes you expect, and put into a formal contract, agreed to and signed by yourself and the builder. Any changes made later could significantly alter the original cost. It is also necessary for the builder to state in writing whether the contract price is subject to escalation. If so, the rate must be stated in the tender. The contract period and date of commencement and completion of building must be stated. Check on the reputation and track records of the builders.

The National Home Builder’s Registration Council

It is an independent, non-profit, non-government organization established by the home-building industry. When building a new home, you should confirm that the builder is registered with the NHBRC by asking for his NHBRC registration certificate. NHBRC rules require that all registered NHBRC builders comply with obligations under contract, the standard homebuilders warranty and home building manual.

NHBRC will investigate valid complaints relating to significant defects of roof structure, superstructure and foundations.

Builders Insurance

It’s important to check if your builder has Builder’s Insurance. This insurance cover any loss of building material on site, and structure in progress, up to the point where the final progress payment is paid out, at which point the normal home owners insurance become effective.