How to build a house [2019 step by step guide for South East QLD]

How to build a house [2019 step by step guide for South East QLD]

How to build a house in South East Queensland. We cover where to start, how to use the $15,000 building grant as your deposit and how to get your construction loan approved.

There is nothing quite like the experience of choosing your home then seeing it come to life!

While it sure is fun to scan through images on pinterest and instagram of the latest kitchen and house designs, it’s a lot more fulfilling when you’re doing it for real in the home you’re going to be living in.

Everyone who’s done it before will tell you, that there’s a big step between imaging it and picking up the keys to your finished home.

We’ve found that many of our clients have questions around the process to build and getting the building loan.

So to help we’ve developed a process below of how to build a house from start to finish, as well as in depth guides on all aspects of home loans (that’s what we do after all). You can also download the visual map of the steps below.

Or if you prefer check out this in-depth training video which takes you through the crucial elements of building a home.

Recently we also had the chance to talk about the Queensland building grant with Channel Nine News and it was great to show how the grant has helped some of our clients build their homes!

Please get in touch if you have any questions or you want to talk about your personal situation in more detail. You can call the office or if you prefer, book online, a call or face to face to meeting with me at a time that suits you!

Get the step by step map sent to your inbox right now!

 

STEP 1. MEET WITH A MORTGAGE BROKER

Why does it help to meet with a Mortgage Broker?

Having a clear idea of your budget when you start is really important as it means that you’re not looking at land and homes that are outside of your price range.

It will mean you won’t waste time your time looking at homes that are outside your budget.

Once upon a time this meant completing a loan pre-approval for a client though over the last 12 to 24 months we’ve found that a number of lenders aren’t doing pre-approvals any more because of the low conversion rate (one bank told us that for every 100 pre-approvals they processed less than 7 would convert into an application in the next 6 months) so it wasn’t a good use of their time.

Another reason to be careful of doing a pre-approval is that we often find that the valuations are varying quite a lot between different lenders and it can be just as important as the banks lending criteria.

A lower valuation amount can be critically important to your application as it can directly impact on the lenders mortgage insurance that you pay.  and reduce the amount of the loan that you can get from the bank.

When we’re helping a client to get their finance approved we will arrange for a valuation on their new house and land (called an ‘on completion valuation’) to be done prior to submitting their home loan so that we’re very clear on the figures for them at the time of application.

In this step, I’m also covering some of the other main questions most people have at this point in the process.

How much deposit do I need to build a house?

This is one of the first questions that I’m asked by new clients:

  • A good base to start from is having at least $15,000 in savings– If you’ve got more than this then that’s even better 😉 If you’re looking to build and you’re a first home buyer then when you add the $15 000 from the Qld Gov’t Great Start Building Grant you’ve now got $30,000 in total which is a good foundation to start.
  • We’ve also helped many clients who have had help in one of the following ways:
    • They’ve bought a home with either a brother or a sister or their parents;
    • They get a gift from a family member who wants to help them into their new home, or
    • Have a family member go guarantor for them so that you don’t pay lenders mortgage insurance. (Having a guarantor could mean that you don’t need to have saved a deposit at all).
  • Aim to have at least 5% saved as a deposit – Some banks will give you a home loan if you have a minimum of 5% of the purchase price saved (if the home you want to buy is $500,000, a 5% deposit is $25,000). Now a bigger deposit can be better as it helps in a number of ways:
  • First, it increases your lending options, secondly it reduces the cost to you of the Lenders Mortgage Insurance (LMI) and lastly it can give you more of a buffer. LMI is a one off insurance payment that’s paid by you to protect the bank.  It’s charged when you have less than a 20% deposit. If you’d like to get into more detail on it then this post is helpful and explains that process that we work through for clients.
  • So now you might be asking, what happens if I don’t have a full 5% saved? Ok. So there are 2 options:
  • The first is to buy and build over 2 steps. This would mean buying the land for a start, then saving enough money at the same time as you’re selecting a builder. This works really well if you’ve saved at least 5% of the cost of the land but haven’t yet saved the full 5% to cover both the land AND the house. It can then give you the time you need to get into the right position for the build.
  • The second option is where you can borrow up too 100% of the value of the property + a buffer to cover the purchase costs (i.e. stamp duty / solicitors fee’s / transfer fee’s etc). This works better where you’ve been focusing on paying your debts (car loans / HECS / credit cards) off over the last 6 to 12 months rather than saving AND you’ve got a family member(s) who have substantial equity in their home or investment property (or cash) that they are happy to help you out. In a family guarantee situation, having some money saved can help as a buffer to cover the costs  of building and moving.
  • Extra costs to buy a home – It’s important to know that you aren’t just saving for a deposit for the home loan but you’re also saving to for the costs of buying. These include stamp duty, legal fees and moving costs. Your Mortgage Broker and solicitor can help with this.
Mortgage Broker Gold Coast - Victor Kalinowski
How to build a house – we can help you to understand the financial aspects of building, like getting the $15,000 building grant.

How do I find out if I qualify for the Government First Home Buyers rebates and grants?

You may have heard that the government is giving first home buyers money to help you buy or build your first home, by offering grants and rebates. These can be used to boost your deposit.

When building a home, these are the:

Check out the Blackk Finance guide on the Queensland First Home Buyers Grant. I simply explain what you need to do to maximise your entitlement.

We also recently had the chance to talk to Channel Nine News in Brisbane about the building grant and how it has helped some of our clients build their homes which was great to see!

Mortgage Broker Gold Coast - Victor Kalinowski
Victor talking to Channel Nine News recently about the building grant – watch the video here.

I am worried I have a bad credit history and won’t be able to get a loan

For a bank to lend you money, first you need to be sure you don’t have any flags against your credit history.

Your mortgage broker may check this with you also.

If you’re concerned about your credit file we recommend you get a copy  before applying for a loan to check and see if there are any ‘marks’ against your name. There can be a number of reason’s why this might be the case: being over 90 days late on mobile phone plans / credit cards / personal loans / electricity bills / car leases / home loan repayments.

Your credit file can be accessed here.

If you do have a bad credit history, there are some things you can do to fix it but what that is is normally determined on a case by case basis.

However, normally if your electricity company or mobile phone company has listed a default its cheaper and faster than if it’s a bank or the Australian Tax Office. Typically, smaller debts that are less than $1000- are less important than bigger debts.

If you feel that it’s something that you’d like to know more about, please call us to talk about your individual situation.

How to build a house in Brisbane or the Gold Coast - Construction Loans
How to build a house.

How does a Mortgage Broker help me build a house?

Seeing a Mortgage Broker will help you get your money ducks in a row before you start signing anything:

Specifically they will:

  • Help make sure you’re ready financially – they’ll tell you in you need to save more or if you need to close an existing credit cards or personal loan that you have.
  • Find you a loan from the hundreds available –  will work with some of the banks that you have heard of, like CBA and the ANZ Bank, as well as many smaller ones that you may have not heard of. A broker will explain the loan options, how they work and help you choose the loan that is most suitable for you.
  • Make sure you understand the building process  – and helping you to make an informed decision.
  • Process the ‘stages’ payments to the builder for you – there’s 6 stages of payments to be made –

1. the deposit,

2. the base,

3. the frame,

4. lock-up,

5. fixing and,

6. the completion stage.

There’s quite a bit of admin involved in having each of these stage payments made so it pay’s saving you the hassle and ensuring work is not delayed as the builder gets paid on time.

  • Be like a personal money coach –  talking you through strategies to save more deposit,  helping you to set and achieve your financial goals and setting things up so it’s easier for you when the time comes to make the first step.

It doesn’t cost you anything to see most mortgage brokers, as we are paid a commission by the bank when you take out your loan.

How to build a house in Brisbane or the Gold Coast - Construction Loans
How to build a house – get your ducks in a row financially before you start building.

 

The basics facts about a home loan

It’s helpful to know a little more about the parts of a loan when you’re getting ready to apply for a home loan so you can understand what you’re signing up to:

  • Interest rates – the media focuses heavily on interest rates, and they are important in ensuring your repayments are no higher than they need to be.  Remember though that there are other features of a loan that can be just as important in the long run. We recommend to be really careful of making a decision based upon an interest rate alone. This is especially true when the rate is a ‘honeymoon rate’ or a variable rate. Both of these can change really quickly in the right circumstances. This is especially true with ‘honeymoon rates’.
  • Number of years to pay off the loan – loans are usually paid off over 30 year period.
  • Frequency of repayments – align these to your pay cycle which helps your budgeting, i.e. if you get paid every fortnight on a Tuesday, then set up your repayments to come out fortnightly on a Thursday. If instead you’re paid weekly, then weekly repayments 2 or 3 days after your salary is credited are a good idea. If you’re making interest only repayments, these can only be paid monthly (i.e once a month). With principle and interest loans you have a lot more flexibility to make payments weekly, fortnightly or monthly.
  • Making extra repayments – it’s great if you can start making additional repayments as soon as your loan settles as it will help you pay your home off faster.  If you’ve got a fixed rate home loan, call the bank and check to see how much extra you can pay off your loan BEFORE you’re charged any fee’s to do so. All variable construction home loans that we’ve seen have the ability for your to have either an offset account or a redraw feature where you can sit your extra repayments. Have someone spend a couple of minutes with you to explain how you can get the best use of your home loan.
  • Lower interest rates – variable loans will offer yo u this, however you will also be exposed to rising interest rates. Read more here on types of loans.
  • Getting an offset account – is a great way of using your weekly living money and rain day savings to reduce how much interest you repay, saving you a lot over the long run.

 

How to build a house in Brisbane or the Gold Coast - Construction Loans
How to build a house

How is finance on a house and land package different from buying an established house?

The finance for buying a house and land package has two stages to it:

  1. Finance for the land, and then
  2. The house.

These loans are usually applied for separately and then bundled together.

When do I need to get a solicitor or conveyancer?

It’s a good idea to have a solicitor on hand when you start looking for land.

This is so when you’re ready to buy, they’ll be there to talk with about what to do next.

A short phone conversation to make sure you’re comfortable with them is all that is required at this stage.

A solicitor / conveyancer helps with the following:

  • Advice on the legal side such as cooling off periods, tenants in common, sole tenants and joint tenants
  • Ensures the contract has the agreed terms
  • Arranges payment of the deposits
  • Liaises with the seller / vendor on your behalf on legal issues
  • Organises council and government searches
  • Calculates settlement payments owing (i.e. amounts for stamp duty, transfer fee’s)
  • Arranges for the land to be transferred into your name after settlement.

    Construction Home Loans - Blackk Finance
    How to build a house – the type of loan you will get is a construction loan.

STEP 2. START HUNTING FOR HOUSE AND LAND PACKAGES

What is a house and land package?

Today builders/property developers do most of the construction of new homes.

They are often responsible for the infrastructure (road, waste, sewage, utilities) and then either:

  • Build the home and sell it as a house and land package OR
  • Provide a range of home designs that can be customised and you select the block of land

What are the advantages of buying a house and land package?

The advantages of buying a house and land package over buying the land separately and building a home are:

  • The whole process can be simpler and faster
  • Usually more cost effective
  • The builder will arrange and manage the tradespeople, materials, council and building approvals and the construction on your behalf

There can be differences between what a house and land package means from one developer/builder to the next to it’s best to do some thorough research.

 

Construction Home Loans - Blackk Finance
How to build a house – house and land packages are generally more affordable and faster to complete.

STEP 3. MAKE AN OFFER ON A BLOCK OF LAND

BINGO!

You’ve found the block of land you want to build your home on!

It’s important that you secure this block of land first, before you decide on a home as the home design may need to adjusted to suit the land or it may just be an unsuitable house design.

What to consider when choosing a block of land

Generally there are a number of things to consider when choosing a block of land:

  • Local community feel, is this the right suburb for you
  • Size, shape, orientation and slope of the land
  • Soil type
  • Access
  • Infrastructure services, such as power, storm water drainage
  • Building restrictions

Talk to your building design sales consultant before you make a final decision on the land to ensure your home design suits or can be modified to suit the land.

Have your solicitor review the contract of sale before you sign

Ask the developer for a copy of the contract and have a solicitor or conveyancer review it, while you are in the process of making an offer.

Your solicitor will thoroughly review the property contract for you, but it’s important you also take a good look and consider:

  • Make sure the contract has your full and complete names on it (including middle name and correct spelling of your name).
  • It’s best to get both the loan for the land and home approved at the same time. This means getting a long enough finance clause, to allow you to choose the home design and finalise the building contract. Often 3 to 4 weeks is enough however it depends how close you are to choosing this.

Pay an initial deposit on the land

You’ll be required to pay a deposit (holding deposit) which is a nominal amount, to the owner of the land.

A second deposit will be payable at step 7, which is when the second portion of the land deposit is paid.

Construction Home Loans - Blackk Finance
How to build a house – we are a mortgage brokerage specialising in construction home loans.

 

STEP 4. CHOOSE YOUR HOME DESIGN

What is involved in choosing a home design?

It’s easy to get swept up in the excitement of looking at different home designs, however it’s important to stick to what you can afford as discussed with your Mortgage Broker.

As a broker we will nearly always see if the clients may be able to borrow up too an additional 15% if they need too. For example, it’s not uncommon to have someone with an initial budget of $300 000 then spend an additional $30 000 to $50 000 extra.

In some situations this isn’t possible – i.e. your limit that they’re telling you is your absolute maximum. It’s a wise idea to know if it’s flexible or not.

If you’re working with a builder/developer, there will be a range of home designs to choose from which can be customised to suit your land and individual needs.

Get creative with choosing the interiors such as colours and finishes to give your home a personal touch.

Sign the builders contract

The building contract is the legally binding document between you and the builder/developer and outlines what you have agreed with the home design, expected time frames and the payment terms.

It’s best to review the building contract with your solicitor before you sign it.

Pay a deposit on the building

Shortly after you sign the building contract, you’ll be required to pay an initial building deposit (holding deposit) to the builder.

A second deposit will be payable at step 8.

Builder will arrange a land and soil test

Depending on the builder, home and land you choose, the builder may:

  • Survey your land (also known as a contour survey) – to make sure it’s suitable to build on.
  • Order a soil test – to look at soil composition, to provide better advice on the requirements for the footings / slab, which ensures your home is built correctly.

This generally costs up to $2,000 for a single story home and up to $3,500 for a double story home. In some cases, the cost will need to be paid upfront and is not included in the loan.

Mortgage Broker Gold Coast
Which block of land would you choose to build on?

STEP 5. GET QUOTES FOR EXTRA WORK

The builders contract covers the actual house itself, however it’s unlikely to cover the costs of the:

  • Pool
  • Solar panel’s
  • Post box
  • Fences
  • Landscaping
  • Outdoor living area’s
  • Driveways
  • BBQ
  • Cabling for audio visual rooms
  • Shed

So if you want to borrow additional finance to fund this work, you’ll need to consider any extra work required and get the quotes now.

How to build a house - Gold Coast Mortgage Broker - Blackk Finance
Pool has been delivered, Brisbane 2015.

STEP 6. MORTGAGE BROKER ARRANGES ‘UNCONDITIONAL LOAN’ APPROVAL

What is unconditional loan approval?

Unconditional loan approval (also referred to as formal or final approval), means your loan has been approved and you can relax as the bank will lend you the money.  Yippee!!

If you’ve had your loan pre approved already (step 1), and your circumstances haven’t changed then having your loan unconditionally approved should be a breeze.

Be aware that if your circumstances have changed, you may ruin your pre approval so you’ll have to re apply.

The commons ones are… don’t:

  • Quit your job.
  • Spend any of your deposit
  • Miss a payment on your credit card, personal loan or car loan or
  • Over draw your transaction or savings account

Meet with your Mortgage Broker to sign the loan documents

Once the lender has approved your loan they will prepare your loan paperwork (also known as loan documents).

These can be mailed or emailed either directly to you or to your Mortgage Broker.

Either way it is best to meet with your Mortgage Broker to sign them together.

It’s likely that some documents will need your signature witnessed by a JP or a solicitor (we have one in the office to do this for you).

Your Mortgage Broker will also have you sign the ‘progress payment forms’ which authorises for your broker to arrange the six builders payments on your behalf (steps 8 to 13).

This saves you time and hassle and can ensure the building is not delayed by payment issues.

Mortgage Broker arranges ‘on completion property valuation’

An ‘on completion property valuation’ is when a professional Valuer estimates the value of your finished home.

This is arranged by your lender.

This valuation will be undertaken by an independent property valuation firm acting on behalf of the bank.

The Valuer will consider:

  • Plans and style of the house, the floor area / size of the home, the number of bedrooms and recent sales of comparable homes that are similar.
  • Price of the land
  • Cost of the extras such as landscaping, pool, fencing etc. The lender needs to be confident that if repayments on your home loan aren’t made, they can recover the outstanding amount owing by selling the property.

Different lenders have different policies on who pays for the property valuation.

Some lenders already have them included in the loan application fee while others request the applicant pays.

If you (the applicant) is charged for it then you’ll know before hand and if the total value is less than $1 million then it shouldn’t cost more than $300 + GST.

How to build a house - Gold Coast Mortgage Broker - Blackk Finance
Frame Stage, Brisbane

STEP 7. LAND SETTLEMENT OCCURS

What is settlement?

There are two settlements that occur, the land settlement and the loan settlement. These happen simultaneously.

  • Loan settlement –  where the funds have been drawn down to pay for the land. This is the point from where interest is charged on your home loan
  • Land settlement –  the payment is made for the land and the title is transferred to you.

You don’t need to attend the settlement as your solicitor arranges the settlement on your behalf, with the seller’s solicitor and your lender and the sellers lender.

Mortgage Broker arranges the Commencement Letter

The lender will provide you with the following important documents:

  • Certificate of Currency for the Builders Contract Insurance (this must show the expiry date, the property address, the building contract amount and the builders name)
  • Certificate of Currency for the Builders Public Indemnity Insurance (must be for a minimum of $5 million)
  • Certificate of Currency for the Builders Public Indemnity Insurance
  • Certifier’s Accreditation Certificate (if the plan’s are approved by a Certifier).
  • The Builder’s receipts to confirm the deposits that you made so far.
  • Commencement Letter – which confirms the progress payments will be paid and construction can begin.

Many builders require this Commencement letter and the Settlement letter before they start the major part of the works, such as excavating and ordering materials.

Pay the remainder of the deposit for the land

This is usually 5% of the total cost of the land, less any holding deposit already paid at step 3.

We recommend transferring the funds to your linked offset / transaction account at least 3 business days prior to settlement and authorising the bank (by signing the paperwork included in the loan documents) to act on your solicitor’s instructions.

YOU NOW OWN THE LAND – YIPEE!!

How to build a house - Gold Coast Mortgage Broker - Blackk Finance
Spring flowers thriving in the new garden, Brisbane 2015.

How soon do I need to start making loan repayments?

Loan repayments start after the settlement date.

It’s likely you’ll have an ‘interest only’ loan during the construction phase so your loan repayments are lower. This helps you pay your rent and the other costs of owning land – rates / water and the land loan repayments.

If this is the case, repayments will be monthly and the first payment will likely be one month after the settlement of your land.

There are six main stages of payment for the construction and these are standard across the industry. Your builder will set these out in a payment schedule and they are shown in steps 8 to 13 below.

STEP 8. BUILDING STAGE 1 – DEPOSIT (5%)

The builder will assign you a customer relationship manager who is your point of contact and will keep you abreast of building progress.

They will begin to order your building materials and book in bricklayers and plumbers.

How much do I pay at this stage?

A total of 5% of the building cost is required (which includes the deposit already paid at step 4).

This covers the set up costs, such as utilities, council plan approvals and ordering of initial building materials such as wood, concrete and tiles.

Blackk Finance Expert Mortgage Broker Brisbane and Gold Coast
Building site in the early morning sun, Brisbane 2015.

STEP 9. BUILDING STAGE 2 – BASE (10%)

The base/slab stage is when the excavations are done for foundations and plumbing, and the concreters  prepare the slab that forms the base of your home.

How much do I pay at this stage?

At base stage, 10% is due.

Depending upon which lender you’ve chosen to go with, there are number of things that have to be done to have this payment made on time.

When you receive the invoice from the builder for the slab stage:

  • Visit the site so you can check the work being invoiced has been done to your satisfaction
  • If satisfied, write on the invoice, ‘Please pay this invoice’, sign and date it and send a clear scan to your mortgage broker.
  • Your lender may order a preliminary building inspection (different lenders have different requirements). The Valuer will check the actual slab against plans provided from the original valuation to ensure they match and completes a report for the lender as confirmation.
  • If you’ve qualified for the First Home Owners Grants and rebates and you’ve submitted your application via the bank it’s likely that you’ll be paid.
Blackk Finance Expert Mortgage Broker Brisbane and Gold Coast
Brisbane, 2015.

STEP 10. BUILDING STAGE 3 – FRAME (15%)

Covers wall frames being delivered and erected, roof truss delivery and installation and the engineers inspection frame.

How much do I pay at this stage?

At frame stage, 15% of the total build cost is due.

On completion, you receive the invoice for the frame stage:

  • You will likely be invited to meet the site supervisor to see the work is done to your satisfaction (if the builder does not suggest this we recommend you request it).
  • If satisfied, write on the invoice, ‘Please pay this invoice’, sign and date it and send a clear scan to your mortgage broker.
How to build a home - Blackk Finance
First rays hitting the building site, Brisbane 2018.

STEP 11. BUILDING STAGE 4 – ENCLOSED / LOCK UP (35%)

The lock up stage is where your home is really coming together. During this stage the roof, plumbing, electrical, external walls and windows are installed.

How much do I pay at this stage?

At enclosed / lock up stage,  35% is due.

Similar to stage 3, view the site and if satisfied, on the invoice write ‘pay this invoice’ and sign it, then forward it to your mortgage broker who will arrange payment for the builder.

STEP 12. BUILDING STAGE 5 – FIXING

In the fixing stage the bathrooms, kitchen and flooring/tiling are completed.

How much do I pay at this stage?

As this stage, known as Fixing Stage, 20% is due.

Similar to stages 2/3/4, view the site and if satisfied, on the invoice write ‘pay this invoice’ and sign it, then forward it to your mortgage broker who will arrange payment for the builder.

How to build a house - Blackk Finance
Lavender in the front yard, Brisbane 2016.

STEP 13. BUILDING STAGE 6 – FINISHING

In this stage the finishing touches are being done such as plastering, painting, doors and carpets.

Usually the external works are completed, including landscaping,the drive way and any paving that’s being done.

If other work is being done, separate to the building contract (meaning you are paying for this separately from the loan) we recommend arranging payment for these at the same time as the draw-down amounts are made during the building stage.

This will simplify the process and save you money on fees as most banks charge a fee for each draw-down.

How much do I pay at this stage?

At finishing stage, the final of 15% of the total build cost is due.

It’s likely your home will require at least 3 final inspections

  1. The building certifier provides a ‘final inspection certificate’ – this certifies that your property has been inspected and your home has been built in accordance with the council and government requirements and standards.
  2. Final inspection completed by Valuer – arranged by the lender to ensure that the building is completed as outlined in the building contract.
  3. The final inspection is done by you at the handover – the builder gives you a detailed tour of your new home. They’ll explain how everything works – kitchen appliances, air-conditioning, lighting, how to maintain the property and keep it in the best condition and hand over the new keys.

Sometimes when you’re doing the final inspection you may find items that you’d like changed. If you do, note it in a defects document and if agreed to by both parties these items will normally be rectified within 10 working days.

When you are satisfied with your completed home, then final payment is made.

The final payment can be either paid by EFT directly to the builders account or it can be issued as a bank cheque, which you can pick up from a convenient branch. If you (and your partner) are both working then EFT is the easiest way to proceed here. If you (or your partner have spare time during the day) a cheque can be the way too go as it gives you something to physically ‘hand over’.

YOUR HOME IS READY TO MOVE INTO!

If you would like to talk about building a home and getting a home loan, I’d be delighted to help you.

My name is Victor and I’m a Mortgage Broker at Blackk Finance based in Brisbane.

I’ve helped thousands of people get loans for their homes and investment properties and I’m also a successful property investor. You can read more about me here.

How to build a house - Blackk Finance
Building site at sunrise, Brisbane.

How to build a house in Brisbane. Mortgage Broker BrisbaneBlackk Finance. 

Blackk Finance Mortgage Broker BrisbaneThe information contained within this page is general in nature. It serves as a guide only and does not take into account your personal financial needs. Before you act on this information you should seek independent legal and financial advice. Copyright Blackk Finance 2019.