Construction Loan

If you are sick of living in an old, cold, and damp house built in the 60s and 70s and now want to build a new house with double glazing and insulation then this product is what you would be looking for.

Banks have a special loan called “Construction Loan” when you want to build a brand-new home instead of purchasing an existing house. The lending terms and bank’s assessment criteria is different for a construction loan. This is because a lender must consider many other factors that do not matter when someone is buying an existing house. These are:

Who is building the house– Are you using a reputed national building company such as GJ Gardener to build or is it a small local builder who has not built many in the past?Builder’s reputation gives more comfort to the lender that the project will complete on time and within the agreed price.

..Is it a Fixed price contract– Lender would like to know if the build cost is fixed and guaranteed or not? Some building contracts may have an escape clause to increase cost if the builders cost increases. This may be fair as it is beyond builders’ control but if the customer does not have any further capacity to extend their loan further, then they could be in for a surprise when the bank declines them an additional loan. Banks generally add some contingency money or cost over-runto to cover these unexpected increases.
Land and Build project or buying a turnkey house– When client is buying a section first and then building on it,banks are tied to the project from the beginning and therefore bank wants to look at the project details including builders’ insurance as it is their money on the line. A turnkey project usually entails, clients putting a house deposit of 10% at the beginning and then once the house is complete and its Code of Compliance issued then the bank will loan the remaining 90% of the house price. Bank’s liability is limited in such projects.

Construction loan can be very rewarding as one gets to live in a new house which is warm and well insulated. It can also bring its challenges too.

Common issues with the construction loans can be:

Project not starting on time– Even though you have paid money to buy the section,it may take months before any work commences as the plans have to be approved by the council and then the build will commence.
Project may not complete on time– Sometimes projects can have unusually long completion delays as the plans were not approved on time, or the builder did not build the house up to the code standard and it is not approved by the council. It may be delayed due to issues like Covid lockdowns, bad weather etc. Supply chain issues and delay in procuring material has also caused much duress to buyers in the last few years. Such delays can often cause cost overruns as the material or labour cost increases and then the builder must re-price the pending work and ask for additional funds to complete the project. This can cause serious problems if the lender does not agree to lending the clients any more funds.
Builder can not complete the project – Sometimes the builder has run out of funds and has creditors chasing due to poor management of the project and/or the funds. This can result in them liquidating their company and running for the hill. It is therefore recommended that clients use reputed building companies with good client protection schemes.
Using unqualified builders– This results in most problems and often can be un-rectifiable. Poor workmanship, incomplete project, no protection like master builders guarantee is all caused by unqualified builders. It is therefore advisable to check on your builder’s credibility on the Licence Building Practitioner website. This is a government resource to protect consumers. We recommend everyone who is looking to build, to search for their builder on the following website and see if there are any issues registered against their name: https://www.lbp.govt.nz/
Manage rent while building a house– Clients who are building a new house on a piece of land that they have purchased will have more ongoing expense during the build than if they were to buy a readymade house. They will have to not only support the servicing cost of the loan as they drawdown upon it but will also have to cover the ongoing cost of servicing their current mortgage or rent (if they are renting).Clients should consider this cost as house builds can take up to a year and longer in some cases.
House value drop– The house may drop in its value due to market correction or any other factor. This may imply that clients have borrowed more than the value of the house and bank gets nervous in those situation as they have no buffer to protect their loan.

There are many different types of construction loan. To give you an idea, you could be borrowing money to do one of the following things under a construction loan:

A. Buy a section – You may be buying a section now because you like the location but have no intention to build on it for a few years

B. Buy a section to build on it– You may want to build immediately after buying a section

C. Buy a turnkey house– You pay 10% and the rest upon completion of the project

D. Kainga Ora/ First Home Grant- Houses that have been built to assist First Home Buyers to purchase their first homes. Government may offer a grant up to $20,000 for a couple if they have been contributing into their Kiwisaver for 5 years each. This would mean they have $20k deposit money to add to their own savings and Kiwisaver funds. This is an extremely good scheme to help people get into their first homes.

E. First Home Loan- With just 5% deposit, First Home Buyers can buy a brand-new house under this scheme. There are some First Home Loan criteria that needs to be met.

F . Borrow to renovate and increase the foot print of the house- any structural change would require building consent and bank would like to see this before loaning funds to support this project.

Please contact us for additional information.

Buying your first home

We will assist you in buying your first home. Talk to a dedicated lending consultant and we’ll help you into your dream home.

Refinancing your home loan to LendingHub

A confidential talk to us could help you into a more affordable home loan with a lending solution tailored to suit you

Managing your Home Loan

Home Loan may give you the options to pay your home loan faster or reduce your regular repayments giving you a life and a home.

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Terrene

The service has been approachable and very efficient. My partner and I have had many enquiries along the way which were answered in great depth. Being a first home buyer, the housing process can be very daunting. There wasn’t a time when we received an answer that we didn’t understand the situation in full clarity.

T Glossop

Ash has been my insurance advisor for a number of years. He has arrange appropriate cover to suit my needs. Over time he has worked hard to reduce loading on my life premium and just recently, remove all loading altogether. A good result for me. He has been there for me over the years.

Soujan M

Customer Service Representative at Ministry of Social Development (MSD)

Very knowledgeable and friendly team, thank you all!

Shen Wang

Ash was very helpful throughout the process. He made the whole thing easy to understand for me. He is amazing to deal with.

Satinder

Ash was very patient in understanding my needs to meet and match with the right policy.

Rushdie

Your interactions with customers are excellent. Always happy to help and attend calls and emails. Always provide choice to select the best.

Rijo

Ash has a deep understanding of the insurance market. His advice to me to table/level my life insurance premiums is something I will always be grateful for as it has provided me with the assurance that I will be in a position to continue paying my premiums to the end of the policy.
I recommend that you allow Ash to offer you a plan based on your needs for the future and like me you will not regret it.

Richard Ferdinands

Operations Manager at Mystery Creek Event Centre

Very happy with the support received from Ash and the team. Ash has been extremely supportive and has gone above and beyond to communicate the plan and explain things.
Highly recommend!

P Joseph

My husband and I had brought a house and had gone around the banks to get the best deal we could on our mortgage and then we had a presentation at work by Ash on how mortgage brokers can help. I decided before we finalised anything to have a chat with him and I am glad that I did. Ash managed to get us an extra 0.4% off our fixed rate and an extra $1k cash bonus. This was with our current bank and our advisor at this bank had already told us he could not match a slightly better rate by another bank. I couldnt believe that Ash could get us a rate that was so much better. Would definitely recommend having a chat with Ash.

Olivia Thompson (nee Coker)

Product Management | Corporate Tax | Financial Services

Thank you so much Ash for helping us out to buy our first home. It was you guys who had lot of patience with us as it was our first time. You really explained us everything step by step so well that we could understand.Once again would like to thank you and Prinal for all you have done for us.

Munesh R

Having observed Ash in action with his clients I have witnessed the professionalism that he displays. Ash takes his time to carefully understand his clients needs. Then, with his indepth understanding of his products and the insurance industry Ash is able to add genuine value.

Matthew Isbister

Award Winning Investment and Mortgage Adviser

Ash T. first let me start by telling you how grateful I am for all the work you did on my behalf. I know it wasn’t easy but you did it. This was a financial turning point for us We really appreciate all the work you put in to helping us get our mortgage. You absolutely went above + beyond all our expectations. I will certainly refer you. if I know of anyone wanting a new mortgage for any reason at all, I will be happy to refer them to you. Thank you again.

Leony Sebastian

Exceptional knowledge on lending! Ash was very clear in guiding us and patiently addressed every questions we had! Highly recommended service.

Jithin B

Ash was very professional. He explained us the process thoroughly in layman’s term which helped us to make decision quickly and efficiently.

H Khera

I’d like to say a big Thank You! to Ash Teotia for his assistance in refinancing our mortgages.

We were looking to review our home lending as all our lending was floating and we thought it might be time to consider fixing at least some of it. Ash’s help was invaluable and with his help we have created a structure that meets our needs and obtained very favourable rates.

If you haven’t taken the opportunity to have a chat with Ash, I recommend it – for a small investment in effort you may be able to realise some significant savings

Gary Carson

Business Improvement Specialist / Business Analyst

Ash Teotia has been helping us through every step of our first build process, answering all of our late night queries and setting up, as expected, through stages in the process. We have gone through the this process, with total understanding each step of the way, thanks to Ash and his outstanding commitment to us through our biggest milestone to date. I cannot recommend him enough, he’s been a lifesaver.

Gage T

Thank you so so much for all the help from your team especially yourself through all year of trying getting our mortgage sorted for me and my family. It would not happened without your dedication.

F Fenton

Thank you so much Ash and your team for all your help! Today is our first journey of being an investor! Yay!!!

A & J Delubio

Firstly I would like to thank Ash for his continuous support shown to me and my family with the finance process and it would have NOT been possible without him. He is very humble, patient and hardworking person and deals with every thing in a professional manner. From the start to the end and till today he still is in contact which shows how supportive he is. We wouldn’t have fulfilled our dream if he wasn’t there as our mortgage broker in this process. The more we praise him is very less but I would like to thank you from our heart in supporting us to purchase our dream house which we never thought of and also the process in dealing with the bank in getting approval for such a big amount and not only that getting extra funds in level 4 lock down to settle our purchase. We have already recommended him to our family and friends and will continue to support him in near future I wish him all the best and success ahead.

Charles S

Thank you for helping us secure our first home. We wouldn’t have gotten to reach this milestone if it wasn’t for all your hard word. Thank you for going the extra mile for us and for never giving up on this journey.

Chance & Mohit

I would happily reccomend Ash to anyone looking for financial advice or with assistance to broker a loan. Ash recently brokered a home loan for us and not only got an excellent deal for us but also provided valuable advice and made the whole process as seamless as possible.

Brendan McQuade

Regional Manager – Upper North Island at PGG Wrightson Ltd

Very grateful for all the hard mahi that Ash and the team have performed over the past year. From being told that I wouldn’t qualify for a mortgage by another broker due to my overseas income to Ash and the team lining up 3 banks to offer me a loan is outstanding. Ash and the team provide a very personalized service and will go the extra mile to make sure all my mortgage and insurance bases are covered.

B Wernham

After being told by another broker we would not be able to secure a loan because of my foreign income it was a welcome relief to find out that lending hub had received notification from 3 out of the big 4 banks that they would lend to us. Thanks for all the hard work in securing us this loan and persistence with our complex insurance cover.

Ben W

10/10