Construction Loan Advice

[brays]

Hi,

We are looking to build our first IP, but need some advice on what a construction loan will allow.

If we get the builder to do the house to turn key, I imagine we can get a construction loan to the value of the contract with the builder.

but if we opt to do/arrange some of the extras ourselves, will we only be able to get the construction loan based on the value of the contract with the builder, or based on what we estimate total construction costs to be?

Thanks

 

[FrankGrimes]

Easiest thing to do is probably just ask the builder to include the things you're after in the building contract. This is what I will be doing with appliances, fences, driveway etc.. Keeps it simple. The contruction loan will only be to the value of the contract.

Other option is get the builder to include extra in the contract, then you could use this. (I'm sure I read this in a book somewhere, but others could clarify)

 

[Ozsunrise]

We are currenlty diong just that. We have included in our loan some things that we wanted to source ourselves- just took along quotes to the bank along with the building documents. now, when we want those things (shed etc), bank just writes checks and posts off- simple!
Susan

 

[frehnejc]

You could also do a cash back arrangement with the builder, not sure if this legal though.

 

[Sheryn]

Brays

You will be able to get the loan based on estimates, discuss this with your loans officer. I wrote out a list of extras with estimated prices and a list of suppliers which matched into what was not included with the building.

Our builder included an allowance of 3K for blinds at our request but suggested to us to source these ourselves as he would have to charge 20% on top to cover any potential issues with warranty [ his time to handle future problems ].

The builder will do a variance if we source the blinds our self. A variance is a piece of paper which states costs, either take this amount off contracted price or add this amount to contracted price.

Most likely we will do a variance and have the builder build a brick letter box.

We are going through a Credit Union for our loan, the loans officer sent building plans to their valuer to value.

Once our builder told us he charges 20% [and I agree he should charge 20% on top for his time to arrange or potential issues] I can see we should source carpet, blinds and landscaping ourselves as there is a 20% saving to costs.

One thing I am not going to skimp on is blinds - I drove past our old house built 28 years ago and the original pull down blinds are still intact. In our current PPOR I have a cheap vertical blinds and they are falling apart.

Can send you list if you PM me.


Sheryn

 

[Sheryn]

You could also do a cash back arrangement with the builder, not sure if this legal though.

I believe a variance [piece of paper = evidence of why things/prices altered and both parties agreed] is the way to adjust contracted prices as long as both parties agree and sign.


Sheryn

 

[tobe]

and the bank and valuer agree too.... I have had some trouble with variations where the builder has included works outside the property such as landscaping, where the valuer has disagreed with the price of the variation versus re sale value.