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Building a new home

Build your new home with lending that keeps pace.

Building your dream home is exciting, but the lending works differently from buying an existing home. We'll help you understand your borrowing capacity, look over your contract from a lending point of view, and set up a construction loan that pays your builder as the work gets done.

Planning to build?How much can I borrow?

At a glance

In stages

your builder is paid as the work gets done

Interest

usually only on the amount drawn so far

$0

usually what our advice costs for home loans

Your options

Ways to build

Build on your own land

You buy the land first, or already own it, then sign a contract with a builder. The loan pays for the build in stages.

House-and-land package

You buy the section and sign a build contract with the same company. Lenders usually treat it as a construction loan.

Turnkey or off the plan

You pay a deposit now and the balance when the home is finished, often months later. You usually pay no progress payments along the way.

Example

How a construction loan works.

Illustrative only. Stages and payment amounts vary between builders and lenders. Before each payment, some lenders may ask a valuer or quantity surveyor (QS) to check progress.

Is it time to talk?How much can I borrow?

Instead of paying the full amount on day one, the lender pays your builder in stages as each part of the build is finished. You usually pay interest only on the amount drawn so far.

1Stage 1: Deposit to the builder
2Stage 2: Floor slab or foundations
3Stage 3: Frame up
4Stage 4: Roof on and closed in
5Stage 5: Completion and code compliance

Once the home is finished and signed off, the loan usually becomes a standard home loan.

How we help

From plans to keys

1
Know your borrowing capacity
We work out how much you may be able to borrow for the land and the build together, before you commit.
2
Look over your contract
We look at it from a lending point of view, such as whether it's fixed-price. Your lawyer should check the full terms.
3
Set up your loan
We find a lender whose construction lending suits your build and handle the application.
4
Through to the keys
We help with each progress payment, then review your loan structure once your home is finished.

Talk to Mortgage Pundit

Before you sign

Things to plan for

A fixed-price contract, which lenders prefer, with little room for cost overruns, so the loan amount is certain.

A buffer for extras, such as variations, landscaping, driveways and window coverings.

The right builder. Lenders generally prefer a Master Builder, but an experienced builder may also be accepted, depending on the lender.

Insurance during the build, usually arranged by the builder, then home insurance from completion.

Valuation and inspection fees, including a valuation "as if complete" and possible progress checks by a valuer or QS.

Rent and repayments at the same time, if you're renting while the build goes on.

A smaller deposit may be possible

New builds are exempt from the Reserve Bank’s deposit (LVR) restrictions, so some lenders may accept a smaller deposit than for an existing home. First home buyers may also be able to use the First Home Loan or their KiwiSaver.

Buying your first home?

Questions we hear often

Building a new home questions

Still have a question?

Call us or book a time. There’s no obligation.

Call 0800 PUNDIT

How much deposit do I need to build?

It depends on the lender and your situation. Because new builds are exempt from the Reserve Bank's deposit restrictions, some lenders may accept a smaller deposit than for an existing home. Talk to us before you sign a contract, so you know where you stand.

When do I start paying interest?

Usually from the first progress payment, and only on the amount drawn so far. Your repayments grow as more of the loan is drawn.

What happens if the build costs more than planned?

The lender usually won't increase the loan automatically, so you may need to cover extra costs yourself. That's why lenders prefer a fixed-price contract, and why a buffer for extras matters.

Does my builder need to be a Master Builder?

Not always. Lenders generally prefer a Master Builder, but an experienced builder may also be accepted. It's up to each lender, and we'll help you check before you sign.

Can I use my KiwiSaver to build?

Often, yes, if you're a first home buyer, for example towards buying the land. Your KiwiSaver provider will confirm what's allowed for your situation.

I'm buying off the plan. When should I talk to you?

Before you sign. Settlement may be many months away, and your circumstances, interest rates and the home's value may change by then. We'll help you plan for it.

Do I pay for your advice?

For home loans, usually not, including construction loans. In most cases the lender pays us when your loan settles.

Ready to start building?

A free, no-pressure chat may help you plan your build with confidence, before you sign anything.

Talk to Mortgage Pundit Call 0800 PUNDIT