Buying a home
Should I build or buy a house in NZ?
More about buying a home:
More about buying a home:
Read the pros and cons to each approach below and reach out to one of our advisers for more information to help you decide which is best for you.
Building a new house
If you are considering a new build for your next home, it’s important to fully understand what you’re signing on for, as you’ll no doubt become involved as an executive project manager who oversees the entire quote, design, build, finishing process.
You can choose from two main types of new build: a house and land package, where a construction company or designer (or both) manage everything and you choose from a limited set of build and design variables; and a bespoke design that can be fully customised to meet your exact requirements (as long as they meet building code).
There are different financing options available when building a home, dependent on the type of build you go for:
- Progressive Payments where the loan is drawn down for the land purchase (minus your deposit), and then the build loan is released in stages as and when the lender receives the invoices from the building company
- Turnkeys are more common with house and land packages where you pay your deposit up front, but the loan does not draw down until the very end of the build, when you ‘turn the key’ to move into your new home
Upsides
- New builds are exempt from loan-to-value (LVR) restrictions, so you may be able to get your home loan with less than 20% deposit. Trusting the purchase price and mortgage payments are affordable, this can be an attractive option for first time buyers with a smaller deposit saved
- House and land packages can be cheaper than established homes if the timing is right and the developer needs to meet a quota. The first stage of sales can often be the cheapest
- You have control over the configuration of your new build, and it may be faster to go down this path than it is to search for an established home matching your needs. Keep in mind your options will be limited if you buy off the plan (house and land package)
- Generally, you will experience lower utility and maintenance costs as new builds are more energy efficient due to their modern building materials, new appliances and the fact they are more airtight and better insulated than older houses. This means they are more environmentally friendly too
Downsides
- Home loan lenders have different conditions for ‘construction loans’. One is that the build must be completed or at least started within a certain number of days of settlement. They aren’t likely to lend as much for building contracts that aren’t fixed price — they prefer the certainty of ‘fixed price’ rather than a ‘labour only’ contract which sees you in charge of buying the materials. Lenders can be wary of ‘labour only’ contracts because these builds are more prone to going over budget
- Land prices can vary widely depending on the demand and the location you’re looking at. It may seem cheap to build a new house, but the cost of the section may narrow your location options depending on your budget
Buying an established home
Buying an established home can represent a more ‘what you see is what you get’ home buying experience. This creates both upsides and downsides to the prospect.
Upsides
- Building defects are sometimes more visible in an established home. Issues that don’t jump out at you when viewing the property will hopefully be identified during a building inspection completed by a qualified professional (which isn’t an option with a new build)
- People often say established homes have a certain amount of character to them, at least more so than most new builds
- When house hunting you can get a feel of the neighbourhood you’ll be moving into — how busy the traffic on your commute is, what schools and amenities are nearby, and what’s missing. This is in contrast to building new in a developing area which may not yet have any of these things
- You’ll most probably have more location options as developments are moving further and further away from city centres. If you like to be close to work, buying an established home could give you more options
Downsides
- If you purchase a house that requires renovations, these will be a cost you’ll need to consider. The cost should be measured financially, and in hours of your time if you are indeed handy enough to DIY
- Your hunt may take longer depending on how flexible you are and how common your desired configuration is
- You’ll be working with the selling party to get the deal done, be they the homeowner or a real estate agent acting on their behalf. Putting offers forward and having them rejected can be a stressful and frustrating proposition for some would-be buyers
- A larger deposit may be required compared to constructing a new build, due to loan-to-value (LVR) restrictions imposed by lenders
Where do you want to be?
We’re all about empowering our customers with the knowledge and assistance to get them where they want to be in life. Let TMO help pave the way to where you want to be.
First Home Buyer Success Stories
Simon and Katie buy their first home, and peace of mind
Location: Woodend, Cantebury
Situation: Buying first home and finding life insurance policy
Adviser: Tony Mounce
We were looking to buy our first home and get life insurance in the process. We had tried to talk to our bank but found them difficult to deal with. We chose Tony Mounce Mortgages as our advisers because everyone we talked to was easy to deal with and talked us through every step of the process without any pressure. We spoke to them about our options and what it would take for us to get a mortgage, then went back to them a year later when we were in a position to go ahead.
A positive outcome without the stress
The outcome was perfect — we got a mortgage on the terms we wanted and have been able to build a beautiful home we designed ourselves.
The team stayed in contact with us every step of the way and made the process as smooth as it could be. We didn’t have to spend hours on the phone with the bank arranging anything or causing needless stress.
Customers for life
Our experience was awesome, and we’ll happily go to them again for any mortgage needs in future. They made every step of the process so easy, and everyone has been lovely and amazing to deal with.
You really feel like the team go above and beyond to get everything right for you.
Simon & Katie Cartwright
FIRST HOME BUYER
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