Construction loans are very popular lending options to real estate agency or individual builder. In New Zealand, there are many banks and non-banking organization offer construction loans in NZ. Most of the lenders have different types of terms and policies. So, it is very important to look for best lender while borrowing money. When building a home, waiting for loans to come through can be a cause of stress and worry. During construction, safety with money is essential as well as efficiency in project planning. Here are a few tips to get your construction loans through as fast as possible, as well as some things to avoid.
1. Online Service:
Do: Applying for loans online is now easier than ever. Most major banking websites will have customer service links, whether this is to an online application form or to a live chat. Customers of these banks will be able to access information directly and easily while others may have to go through a few more formalities. In New Zealand, most of the banks and non-banking firms may allow the online application. If you busy with tight work schedule, you may apply online and have chat over the phone.
Don’t Do: When applying online, make sure to utilize all the websites capabilities. Online chats are often the best option instead of phones, at least for initial points of contact and conversation. Furthermore, plan what you need from the customer service team, as they will not be able to help you efficiently unless they know what you want. Most importantly, you should be very careful while inserting sensitive data.
2. Know How Much You Can Borrow:
Do: Make sure to check and how much you can actually borrow. For a top-up loan, it can be up to 90% of your home’s value, and a similar amount for major construction, less for pure labor costs. It is understandable that banks & non-bank organization will allow you the certain amount of money based on your earning & savings. You should contact 3 or 4 lenders regarding eligible loans amount.
Don’t Do: Don’t estimate how much you need or how much you think you’ll be able to borrow. You will need to get a few different valuations, which may seem tedious, but is worth it to assure accurate information is processed quickly.
3. Know Where Your Loan Will Go:
Do: It is important to realize that your construction loan will go directly to the builder rather than to you. This is so construction starts as soon as possible. Sometimes people prefer to get money in their personal account and it may take a bit more time for processing money.
Don’t Do: Don’t panic if you don’t see the loan going into your account, and do not confuse things by contacting the bank. Be in contact with your builder at all times concerning financial details. I should suggest finding a local reputed builder.
4. Understand How Construction Loans Are Paid
Do: It is imperative to realize that construction loans are paid out in stages. The stages are usually specified in the contract with the builder, which needs to be certified at precise points to assure the correct work has been done. The builder should finish developing work on time and it might save your less interest for building loans.
Don’t do: Do not expect all the loan money to be at your disposal. For your own protection, it is paid out to the builder by activity, assuring the construction is kept up to value. I personally recommend having mortgage protection insurance. It might save your finance if you face any uncertain financial crisis.
5. Learn About Your Interest Rates:
Do: Understand the interest you will be paying on loans already delivered. Usually, construction loans are on floating interest rates, which can increase or decrease depending on the market and on construction. In New Zealand, you may get many banks and non-bank options for lending constructions loans. It is very important to do bit research for best interest rates. I personally recommend having brokers, if you are comfortable to work with financial brokers. They mostly know latest market update regarding interest rates. Most of the brokers have direct access to the bank. It may help you to get low-interest rates as well.
Don’t Do: Do not neglect to study your interest rates and ignore savings you could potentially make on things like rent. This will help you financially throughout your build. I saw many people do rush while taking construction loans. They are not doing proper research or analysis financial organization. It can make your process bit harder.
6. Managing Your Initial Deposit:
Do: Realize that on most loans a deposit is needed for things to run smoothly. This can be up to 10% of the loan but will vary.Many financial advisers suggest dealing with leading bank while depositing money. It may help you to get best and highest loans option.
Don’t Do: Do not take the first deal you see on deposits. Thorough research and planning will get you the best value for your money, and assure things run smoothly, meaning your loan will be approved quickly and correctly.
To sum up, I understand that it is time-consuming to do research on the financial organization while seeking for construction loans. If you do so, it might save mental panic and help to get low interest rates with affordable terms & conditions. In New Zealand, you must get many options while choosing financial lenders. If you take bit more time to finalize lenders, you may find good & affordable organizations.