House & land packages financing question

[LionsandBears]

I've never bought a house before and DH has only bought in UK so I'd like to understand some things which may seem quite obvious to others.

We were thinking of getting a house & land package. We're eligible for the FHOG and FHOB - we're in Victoria. When buying a house & land package, say we buy one with titling happening in September and it will take about 9months to take possession of the completed house. The land office lady says we pay them a 10% deposit on the land + stamp duty on the house. Once it's titled, we pay them the remainder, then the house gets built. That takes however long that takes and I'm not sure how much the builder needs when.

So that means we'd be paying a mortgage on the land for 9 months or however long it takes to build the house. We'd still be renting, so dont know if we can afford to do that.

So even though we get less FHOG and have to pay more stamp duty, it may be we have to buy an established house instead.

Does this sound right or have we misunderstood?

[Bumperstump Cummerbund]

I don't know about all that, but I know that when we were planning to build, we were going to get a construction or bridging loan. That's a loan that you don't make any repayments on for 12 months. So technically you have 2 mortgages, but you're only paying one - it's specifically designed for building or buying a new property before you sell your current one. Could you speak to your bank about that, and see if they'll do it?

[RhiChiChi]

You should only have to pay stamp duty on the land ONLY, not the house b/c it is not built yet.
The Bank will do a loan for the full amount you require to borrow for land & house at whatever % you are eligible to borrow (usually 80% of the land price plus the cost to build the house) but will only draw what you need to pay to settle the land in full. Then usually the builder will invoice the Bank per stage of the building of the house (ie: base, frame, lock-up etc...), however in this case it seems like the builder is happy to wait for full payment of the completed house at the end. So, initially you will have a mortgage for the land amount with a balance to draw at the end of the completed house. I hope this makes sense & helps.

[Pandora]

You only pay stamp duty on the land, the house isn't built yet so you can't pay stamp duty on it.

You should never pay the full amount before construction, ever.

I will find my contract, we built in Melb in 2008, but you pay progress payments at different stages of construction - frame, plaster, lockup etc.

We got a construction loans and drew on it at each stage as the payments were due, you I ly pay interest on the amount you've drawn from the load amount do it gradually increases until completion when you will be paying the full mortgage.

Look up 'home one' it's a good forum for building and renovating

[skybie]

have u looked at spec homes? we couldnt afford to rent and pay mortgage on land so we went spec, cons, not a huge range and u dont get to pick you carpets ect, pro's alot easier to get into the market

[Olive]

oohhh where you looking?

[Floweryfields]

Regarding how much the builder needs and when, normally you pay installments - so once, say, the framework is completed you pay so much, then once it's lock up and so on. As to how much, that will be dependent on how much it's worth to begin with. All of that will be written up in a contract.

[Just Me]

We built our house in Queensland in 2002 but we got a loan from the bank and when the land was bought, the money went off our loan then, then after each stage of construction, the bank sent someone out to inspect that it had been done and done properly and then would release the funds to the builder.

In that time, we only had to pay the interest of the loan, not a full repayment amount. Our full repayment amounts did not kick in until it was handed over to us. There were a couple of extra costs that we weren't expecting - though not too bad. Rates - we had to pay rates on the land itself (not on the facilities because they weren't hooked up). We also had to pay council fees when our water and plumbing were hooked up. It wasn't that expensive but if you are budgeting for it you probably want to be aware.

[Miss.September]

We're in Victoria. There is no stamp duty if you're building. You pay stamp duty on the land only. Our stamp duty on the land was taken out of out first home builders grant and the remainder gets sent to you.

The builder will give you a schedule of when progress payments need to be made in the beginning. It tells you what stage the house gets to when another progress payment is to be made. We had one at slab stage (roughly 10% of total mortgage), one at frame stage (add another 10%), one at lock-up (roughly 20%), one once the fixings are installed (about 25%) and then the last one at handover. We know there was an additional progress payment, we think it may have been the site cut/preparation, but we can't find our paperwork on it to be sure.

The builder lets you know when a payment is to be made, and then you take the documentation to the bank to draw more money. Your repayments go up at each payment, but you never have a full repayment until the loan is fully drawn on the day you get the keys.

We couldn't rent and build at the same time, so we lived with family. We were told it would be nine months from us signing the paperwork to buy the land to us moving into our house. In reality, it took nine months for the land to be released, another three months for them to start building, and five months until we could move in - and by the end we were pushing them hard. They worked right through Christmas to get our house done due to all the rubbish we'd been spun. If your land that you're looking at hasn't been developed yet (we were stage one), be very wary of what you're being told.

Good luck, Tashy. Hope that helps.