When you are building a new house and need a loan to assist you with the payment for the build, you will need to approach the lender for a Construction Loan. Each lender may have different guidelines when it comes to lending for a build. For instance, some lenders will only lend between 70% to 80% of the value of the finished property, while other lenders may go up to 90%. With a new build you should get a fixed price contract ideally with a master or certified builder as their work will be guaranteed. Before the mortgage is fully approved you will need to get a Registered Valuation and agree with the builder and the lender at what stages during the build that progress payments will be made. At each stage the bank may ask for an updated “as is” valuation and you will need to stay below the lender’s loan-to-value cap (generally 80%) throughout the build.

Most banks lend against the project cost. Sovereign is a bit different and will let you use an acquisition price that makes allowance for “reserves” and interest capitalization. This along with some other differences around the build management make Sovereign a good choice for these types of mortgages.

At Mortgage Mantra, we have over 10 years experience in helping kiwis get into their first home. We can help you fulfill your dream of building a new house and navigate you through the Construction Loan process.