Building a home is a monumental journey, a journey filled with choices that shape your living space, your finances, and your family's future. One of the pivotal choices you'll face is how to initiate this journey – through a turnkey arrangement or a house and land package. Both options offer their own set of advantages and considerations, and understanding the differences can help you make an informed decision that aligns with your aspirations and financial capabilities.
The Turnkey Experience
Imagine this: You find a brand-new home that speaks to your desires and needs. With a turnkey arrangement, you pay a deposit, usually around 5% to 10%, and then once the construction is complete, you move in. One of the most appealing aspects of turnkey homes is that you don't have to worry about mortgage payments during the construction phase. It's an ideal solution for families with children or those living in bigger cities with high rents.
Banks are generally fond of financing turnkey properties. In fact, the lending criteria for these homes are often different from those of existing properties. For instance, there are no Loan-to-Value Ratio (LVR) restrictions, making it easier to secure financing. With a minimum deposit of just 5%, the barrier to entry is significantly lower compared to many other home buying options.
House and Land Packages
On the other hand, the concept of a house and land package involves staged payments. In this scenario, you first purchase a section of land and then begin paying a mortgage on it. As construction commences, you also start paying off the mortgage for the in-progress house build. This arrangement can open the door to unforeseen challenges, particularly related to cost overruns during construction.
Banks tend to be more cautious when it comes to lending for house and land packages due to the potential for these cost overruns. To mitigate these risks, they might require contracts from reputable builders. Contracts from Registered Master Builders or Certified Builders can offer a higher level of security, ensuring that the project stays on track and on budget.
The Importance of Detailed Contracts
Whether you're pursuing a turnkey home or a house and land package, the contract you sign will have a significant impact on your experience. Many contracts include provisional costs (PC sums), which are estimates for certain aspects of the project, like the kitchen. Unfortunately, these estimates often end up being lower than the actual cost, leading to unexpected expenses.
To safeguard your investment and avoid such surprises, it's essential to have a clear and comprehensive contract. In the case of house and land packages, choosing a Registered Master Builders contract can be especially advantageous. This type of contract protects the deposit you pay to the bank, providing you with additional financial security.
Partnering with Experts for a Smooth Journey
Embarking on the journey of building a new home can be complex and overwhelming. Fortunately at NZ Mortgages, we have supported over 5,000 clients in their pursuit of building a new home right across New Zealand. With access to major banks and a proud associate member of the Registered Master Builders, we're equipped to guide you through the challenges and triumphs of this journey.
Whether you're eyeing a turnkey solution or considering a house and land package, our expertise and resources are at your disposal. Visit our website at www.nzmortgages.co.nz or give us a call at 0800 100 300 to start your journey toward your dream home anywhere in New Zealand. Your homebuilding adventure awaits – let's embark on it together.