Buying vacant land and building can be one of the most satisfying experiences of your life. It can also be the worst. There are many things to be aware of.
When building, there is no house (only the land) to use as collateral (or security) for the loan. A construction loan allows you to secure the mortgage based off an “on completion” value. For this to happen, the lender requires you to use a licensed builder with a fixed price tender. That tender is then used by the lenders valuers to give a value of the completed house and land.
As the construction progresses, there will be certain milestones. It is at this time that progress payments will be paid by the lender to the builder.
- You get to plan your home the way you want it, with everything brand new and in your colour choices.
- You get to buy the land where you want to live, with the size of the block that you want. “If only I had a bigger yard.”
- The New Home Grant scheme offers significant savings in Purchase Stamp Duty over existing properties.
- Weather: With bad weather, a normal 26 week contract can easily turn into a year.
- Site Costs: Blocks of land are rarely completely flat and will require excavations or retaining walls. This can have a dramatic effect on site costs.
- Piering Costs: Piers are the holes drilled into the ground and filled with concrete to stop the slab and the home from simply sliding away. Piering costs can be high and should be discussed with your builder and or land sales person. Although builders mention it, they are unable to quote on it until the Pre Slab drilling is done (which is well after the contracts have been signed).
- Builder Stability: Many times, the builder is just small to medium business that can struggle in hard times and sometimes go out of business. There are insurances and bodies out there to protect you, but it is still a nightmare experience.
- Communication: The most complaints are caused by poor communication (accidental or otherwise). Always document everything and have every post contract change confirmed in writing.