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Thread: those who had a mortgage already and built another new house...

  1. #1

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    Default those who had a mortgage already and built another new house...

    how did u go about making progress payments aswell as paying off ur current mortgage??
    we're looking at getting a bigger house and while building is cheaper than established around here i dnt see how on earth we'd be able to make the progress payment.
    is there a way around it?


  2. #2

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    we don't currently have a mortgage apart from the one for our house currently being built, but we do have rent to pay on top of it.

    u can minimise your payments on both mortgages to interest only, this will reduce the payments significantly until such time as u move into the new house, then you'll need to start paying principal and interest.

    could u sell your house and rent while the house is being built?

  3. #3

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    Well we're looking at metricon and they have an 18 week build gaurantee, so by the time our house sold and settled it would hardly be worth renting really. plus i dnt really want to be moving twice if i can avoid it! will look at the interest only rates and see if its do-able, thanks hun

  4. #4

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    We're doing it but its a transportable house so there's no progress payments - they want several thousand along the way for various things, and then we need to get finance for the rest.

    As crazy as it seems, we're just giving the builder whatever they want out of our regular pay, *and* putting aside the money we need to pay the new mortgage when we eventually get finance. We don't earn a lot, which ironically means we have been forced to save a 40% deposit ... if we earnt more we'd need 5%. Its a bit interesting saving at the moment as I got cut off centrelink for 3 weeks and have only just got PPP back and still haven't got any FTA, and that money is supposed to be going towards the house.

    We're probably going to keep the old house as a rental since it is so hard to time selling it so we don't need to move twice. Renting is a stupid idea as rent in this area is literally more than we would pay on all three mortgages.

  5. #5

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    we'll have no issue selling our current house, great location, ppl are literally camping out overnight on the steps of the landsales office when theres a land release, and our house is pretty unique. we could keep it as a rental but i dont want the stress really!
    theres no way we can pay both at the same time, it would be virtually all of DFs weekly pay on the houses and not a cent left for us, even the interest only rates are still pretty expensive, guess we;ll have to scrap that one

  6. #6

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    Talk to a mortgage broker and see what options they have for you. You may be able to get a bridging loan or some such if you have enough equity and are selling the old house - either way there will be options out there. Generally with a construction loan you only need to make repayments on the part that is drawn down anyway, so it isn't the full cost that it would be once the house is completed.

  7. #7

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    Default those who had a mortgage already and built another new house...

    How big is the house you are looking at? Cos the build guarantee won't always apply (well you will still get paid x amount per week they are late but don't expect the actual build to be on time. Lots are I hope yours is one.

    When you get a construction load with periodic drawdowns you only pay repayments on the amount you have drawndown. If you want interest only repayments it may affect the type of loan you have to apply for depending on the lender.

    We built our house while selling so had to do both lots of repayments at once, and it was when the variable rate was over 9%

    It was hard. But no worse that when I was on mat leave and we were on a much lower income.
    Still you need to work out the realisitc repayments and the lender or broker will help with this. Then you may need to make decisions like do you need internet etc if it comes down to that.

  8. #8

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    Not sure if this applies, but when we built our house we had the option of paying full repayments in the progress or $50 a fortnight for the period of construction... Is there something like that you could look at with the bank?
    So it meant we accrued more interest and thus a slighlty larger mortgage overall, but saved the doubling up on rent/repayments etc...

  9. #9

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    Building a house is surprisingly slow. We were told 9-10 months from start to finish. We're at about 4 months now and haven't even chosen what colour we want the damn thing to be! We're expecting this to drag on for ages, and then at 9.5 months a truck will just turn up with a house on it without warning and we'll be running around like chooks with their heads cut off trying to get finance.

    We own our land outright, at least.

  10. #10

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    Just thought I would mention it is worth talking to your builder and seeing if you can negotiate payment / settlement on completion.
    Not all builders will allow this (particularly not the smaller companies) and it does cost a bit more (Added 10k to the IP we are building, plus extra stamp duty), but gives you more flexibility. By paying on completion, the builder covers all the costs throughout construction and you just need a normal home loan for settlement (like you would if your were buying an established house). So there are no repayments until after you have settled.

  11. #11

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    oh and building houses often blows out time wise. Our PPOR was 12mth past when we were originally told. And our IP was supposed to be completed in Feb 2010, but they have only gotten around to starting it in the last month, for various reasons. Hopefully it will be completed by christmas (although I won't be upset if it is January as that is a much better time to try and rent it out for a premium).

  12. #12

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    Thanks for the tips girls, Lime will definetly look into what you've said. fingers crossed, i reallllllllllly want something in the works asap. moving sucks as it is, but when ur monsterously pregnant...even less fun!

  13. #13

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    We changed our mortgage repayments to interest only while we built our current house and then kept it that way while we were trying to sell it. Meant that things were a bit tight money wise for a few months, but it was a lot easier to deal with overall.
    We had different lenders for the 2 mortgages though. That was just the way it was set up through our broker

  14. #14

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    I have done it, and we went on to keep our other property as a rental, but have almost officially sold it now (waiting for the money to hit my account in 2 weeks time )

    The timing sucked construction started a LOT later then it was supposed to and they poured the footings when I was still in hospital with DD after she arrived. So it put a huge amount of stress as I wasn't working for as long as we had planned and it really threw a spanner in the works. But we got there in the end.

    I would do what you can to reduce as much of your outgoings as possible, you should be able to pay interest only on the construction loan while building, and see if there are any changes you can make to your current mortgage to make it easier. Best to go in and have a chat to your home loan manager or bank manager, they can really help out, and best to do it upfront rather then when things get tight or tricky.

  15. #15

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    There are some builders that don't require progress payments, but not sure if that style of house suits you. I'll PM you the one I know of if you like

    We sold our first house and rented while we built this house, so slightly different scenario. It was hard toward the end, especially when the loan was 85% drawn over the Christmas break period (grrrrr!) but we managed to knuckle down and save heaps before the first progress payment was needed and that kind of kept us above water. The excitement of the new house actually made us determined to stick to a really strict budget (and have no life lol) for the 8 months while we built. If you can do without, it will be worth it!

  16. #16

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    Remember too that your bank will release the money to the builders in 3 stages - so you wont be on full repayments until the final handover.
    Land, slab and final completetion, and you only mke repayments (and interest) on what the bank has already laid out.

  17. #17

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    Default those who had a mortgage already and built another new house...

    We bought our land seperately and for the house alone we have 5 progress payments - slab, frames, roof on, lock up and final

  18. #18

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    One thing I thought I would mention, is look into what your builder means by their 18 week build guarantee. We are currently building and our neighbour is going with a company that has a similar building guarantee, however, the guarantee had lots of 'conditions'. For example, the 18 weeks didn't start until the house had council approval (which can be several months from when you buy the block of land, which you will will need to be making repayments on in the meantime) and their build time also can be extended due to 'bad weather' (or whatever the builder deems to be bad weather). There are other conditions too but I can't remember at the moment.

    Our builder doesn't have such a guarantee, but our house is taking a 'typical' amount of time based on most houses to build in SA these days. We signed up for our block of land and with our builder last August and our house will be ready in a months time (13ish months total). We had to sell our house and rent as there was no way we could afford our repayments on our other house as well as repayments on our new house.

    Good luck!

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