When purchasing a house and land package, there are a few basic rules that you should be aware of. In most cases there will be two contracts. One contract will be with the developer for the land and the second contract will be with the builder for the construction of your home.
The bank becomes your ally during the process of purchasing, a house and land package as they will monitor the progress of your build until completion.
The bank first releases the funds to complete the purchase of the land, and they will hold the balance of your loan which will be used to pay for the construction of your house as the build progresses.
You will take ownership of the land first which means you become the legal owner of the land. Your builder will then commence building your new home. To be able to purchase this type of property, you will need to apply for a construction loan.
There are normally six drawdowns during the construction period. The bank will release 5% of the purchase price to the builder to enable the builder to start the process of your build. After this stage the builder will receive payment in arrears for the work completed. Your builder will issue you with an invoice after the work has been done on each stage. You will send this invoice to your bank, who will then arrange for a valuer to visit the site and verify that the work being invoiced has been completed to the specifications of your plans and council requirements.
Your loan payment during the build period will increase according to how much is drawn down at each stage. For this reason, your payment will be interest only until the build is completed and you have received the keys from the builder. You need to ensure that you have the cash flow to carry the loan through the build period.
It can be stressful a time trying to understand the process that happens while building your home. Working with professionals who can guide you through this process and answer the questions you will have along the way will help make the process more enjoyable.
If you are looking to buy a house and land package, contact Angela Dye at Richmond Residential Pty Ltd. on 0414608970 to discuss your situation or book an appointment to meet online.