Finance advice

How construction finance works

By Darren Standish

Standish tnWhen entering into a building contract you should check that the contract has a condition that allows you to make every reasonable effort to get finance by a specific date, so that if you are unable to get finance the contract will not proceed.

Blogger: Darren Standish, Property Prosperity

It is important that you take the time to ‘shop around’ for a lender before you enter a building contract. An experienced Mortgage Broker will be able to assist you to ensure the best possible lender for your requirements.

There is an important difference between getting a loan to build as opposed to a loan for an established property. When you employ a builder, you agree to pay the builder by instalments (called progress payments) depending on specified building milestones being achieved. Usually, you will only pay interest on the amount of the progress payments that have been paid to the builder, not the total amount of the loan.

So, until the final progress payment is made, you will generally only pay interest on the amount of money actually paid to the builder.

There are a number of ways you can organise your finance for building however the most common way is to extend the existing loan for land to finance the construction of your house  

In today’s financial market the maximum amount extended for new dwelling construction is approx 95% of the total construction cost. This means that if your house cost $200,000 to build you would be required to contribute $10,000 to the construction cost from your own cash reserves.

It should be noted that a considerable saving can be made on stamp duty when constructing a new home compared with purchasing an existing home since stamp duty will only be paid on the land not on the construction of your new home.

For example if you bought a block of land for $200,000 and build a house for $200,000 you would only pay stamp duty on the land (approx $10,000). Whereas on an existing $400,000 house you would pay stamp duty on the full purchase amount (approx $20,000)

Another major benefit existing for first home buyers when building a house is that they may be eligible for the First Home Buyers Grant (FHOG). The FHOG is currently $15,000 for newly constructed dwellings.


About Darren Standish
Standish

Darren Standish established Property Prosperity in 2004 initially as a property development company, however after repeated requests for assistance the business evolved into a development consulting business.

Property Prosperity was initially focused on assisting clients with subdivisions and negotiating with councils to ensure that clients maximized their return on investment. Over the years additional services were gradually added to ensure the development process was as seamless as possible for its clients. We expanded into offering individually tailored finance solutions and then added Property Development Analysis, Property Sales and a Builder Broker Services.

Darren is the overachiever of the team and has more qualifications than your average university graduate. As well as completing a Bachelor in Economics, Bachelor in Commerce and post graduate in Accounting he subsequently went on to complete a Diploma in Financial Service, Diploma in Real Estate and Certificate IV in Building. He is a qualified Certified Practicing Accountant (CPA), a licensed Real Estate Agent, licensed Mortgage Broker and holds a Builders License.

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  ["introtext"]=>
  string(255) "

Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

    \r\n
  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
  • How the mortgage division supports the overall business of Rethink Investing<\/li>\r\n<\/ul>","clientImage1":"images\/podcasts\/Son-Pham.jpg","clientUrl1":"https:\/\/rethinkinvesting.com.au\/","clientName2":"OpenCorp","clientDesc2":"

    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
    • How he wants to help clients take advantage of the current market<\/li>\r\n
    • Why negative press can be good for investors<\/li>\r\n<\/ul>","clientImage2":"images\/podcasts\/Michael-Beresford-170x170.jpg","clientUrl2":"https:\/\/www.opencorp.com.au\/","clientName3":"","clientDesc3":"","clientImage3":"","clientUrl3":"","clientName4":"","clientDesc4":"","clientImage4":"","clientUrl4":"","author_promotion_line":""}" ["metadata"]=> string(53) "{"robots":"","author":"","rights":"","xreference":""}" ["metakey"]=> string(60) "mortgages, tighter, lending, economy, brisbane, good, option" ["metadesc"]=> string(200) "Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall" ["access"]=> string(1) "1" ["hits"]=> string(2) "28" ["xreference"]=> string(0) "" ["featured"]=> string(1) "0" ["language"]=> string(1) "*" ["readmore"]=> string(3) "818" ["ordering"]=> string(1) "0" ["category_title"]=> string(17) "Property Showcase" ["category_route"]=> string(25) "podcast/property-showcase" ["category_access"]=> string(1) "1" ["category_alias"]=> string(17) "property-showcase" ["published"]=> string(1) "1" ["parents_published"]=> string(1) "1" ["lft"]=> string(2) "98" ["author"]=> string(12) "Todd Stevens" ["author_email"]=> string(33) "[email protected]" ["parent_title"]=> string(7) "Podcast" ["parent_id"]=> string(2) "48" ["parent_route"]=> string(7) "podcast" ["parent_alias"]=> string(7) "podcast" ["rating"]=> string(1) "0" ["rating_count"]=> string(1) "0" ["alternative_readmore"]=> NULL ["layout"]=> NULL ["params"]=> object(Joomla\Registry\Registry)#1215 (3) { ["data":protected]=> object(stdClass)#1212 (95) { ["article_layout"]=> string(14) "spbase:article" ["show_title"]=> string(1) "1" ["link_titles"]=> string(1) "1" ["show_intro"]=> string(1) "1" ["info_block_position"]=> string(1) "0" ["info_block_show_title"]=> string(1) "1" ["show_category"]=> string(1) "1" ["link_category"]=> string(1) "0" ["show_parent_category"]=> string(1) "0" ["link_parent_category"]=> string(1) "0" ["show_associations"]=> string(1) "0" ["flags"]=> string(1) "1" ["show_author"]=> string(1) "1" ["link_author"]=> string(1) "0" ["show_create_date"]=> string(1) "1" ["show_modify_date"]=> string(1) "1" ["show_publish_date"]=> string(1) "1" ["show_item_navigation"]=> string(1) "0" ["show_vote"]=> string(1) "0" ["show_readmore"]=> string(1) "1" ["show_readmore_title"]=> string(1) "0" ["readmore_limit"]=> string(3) "100" ["show_tags"]=> string(1) "1" ["show_icons"]=> string(1) "0" ["show_print_icon"]=> string(1) "0" ["show_email_icon"]=> string(1) "1" ["show_hits"]=> string(1) "0" ["show_noauth"]=> string(1) "0" ["urls_position"]=> string(1) "0" ["captcha"]=> string(0) "" ["show_publishing_options"]=> string(1) "1" ["show_article_options"]=> string(1) "1" ["save_history"]=> string(1) "0" ["history_limit"]=> int(10) ["show_urls_images_frontend"]=> string(1) "0" ["show_urls_images_backend"]=> string(1) "1" ["targeta"]=> int(0) ["targetb"]=> int(0) ["targetc"]=> int(0) ["float_intro"]=> string(5) "right" ["float_fulltext"]=> string(5) "right" ["category_layout"]=> string(6) "_:blog" ["show_category_heading_title_text"]=> string(1) "0" ["show_category_title"]=> string(1) "0" ["show_description"]=> string(1) "0" ["show_description_image"]=> string(1) "0" ["maxLevel"]=> string(1) "0" ["show_empty_categories"]=> string(1) "0" ["show_no_articles"]=> string(1) "1" ["show_subcat_desc"]=> string(1) "0" ["show_cat_num_articles"]=> string(1) "0" ["show_cat_tags"]=> string(1) "0" ["show_base_description"]=> string(1) "1" ["maxLevelcat"]=> string(2) "-1" ["show_empty_categories_cat"]=> string(1) "0" ["show_subcat_desc_cat"]=> string(1) "1" ["show_cat_num_articles_cat"]=> string(1) "1" ["num_leading_articles"]=> string(2) "15" ["num_intro_articles"]=> string(1) "0" ["num_columns"]=> string(1) "0" ["num_links"]=> string(1) "0" ["multi_column_order"]=> string(1) "0" ["show_subcategory_content"]=> string(1) "0" ["show_pagination_limit"]=> string(1) "1" ["filter_field"]=> string(4) "hide" ["show_headings"]=> string(1) "1" ["list_show_date"]=> string(1) "0" ["date_format"]=> string(0) "" ["list_show_hits"]=> string(1) "0" ["list_show_author"]=> string(1) "0" ["list_show_votes"]=> string(1) "0" ["list_show_ratings"]=> string(1) "0" ["orderby_pri"]=> string(4) "none" ["orderby_sec"]=> string(5) "rdate" ["order_date"]=> string(9) "published" ["show_pagination"]=> string(1) "2" ["show_pagination_results"]=> string(1) "1" ["show_featured"]=> string(4) "show" ["show_feed_link"]=> string(1) "1" ["feed_summary"]=> string(1) "0" ["feed_show_readmore"]=> string(1) "0" ["sef_advanced"]=> int(0) ["sef_ids"]=> int(0) ["custom_fields_enable"]=> string(1) "1" ["show_page_heading"]=> string(1) "0" ["layout_type"]=> string(4) "blog" ["menu_text"]=> int(1) ["menu_show"]=> int(1) ["page_title"]=> string(53) "Finance Tips and Insights - 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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1213 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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