Banks want finished houses, and builders want to build them. It seems like a match made in Heaven, but there’s one catch. Someone has to pay for the houses to be built, but neither party is putting their hands up. As a consequence, New Zealanders are left with a pre-approved loan that can’t buy them the land or allow them to make progressive payments during construction.
At least that’s what most people seem to think.
When I say that banks want finished houses, I mean that despite pre-approval, New Zealanders aren’t able to get themselves into a house because banks will only finance the completed home. Most builders, however, can’t build without finance. It’s a rock and a hard place, and Kiwi families are the ones feeling the most pain.
It’d be nice if the builders could buy the land and build the house before selling it to someone a bank has pre-approved, but very few building companies can afford to do something like that. In fact, 80% of home builders in New Zealand are small businesses and they just can’t finance the build themselves.
Pre-approval is the first step for a home buyer, and it’s a very hopeful and exciting step. Going to a big home building/development company like Universal is one option, but trying to match the location, size, price, and style specific to your needs often ends with disappointment.
At that point it’s tempting to give up. There is, however, another option that plugs the gap between construction and the mortgage itself.
Here at Southern Cross Partners we’re seeing strong growth in a product that funds the builder to complete the project, after which the bank’s pre-approval kicks in and they take over the mortgage with the new home owner.
In essence, working through mortgage brokers like New Build, builders can get help to fund the land and house package up to handover of the property to the new owners.
After the house is built, it’s simple. The pre-approved mortgage from the bank kicks in and everyone is happy, either with a home, or a successful build.
Don’t just stop with the bank. Banks are simply the beginning and definitely not the end of your journey into a first home. Go to a mortgage broker, and consider all your options.
Too many builders and first-time homeowners aren't doing their research or asking the right questions. You don’t have to be one of them.