Category Archives: Mortgage

Things the bank needs from the builder

Christmas is over and we’re all drifting, exhausted, towards the year’s finish line.

Good time for… filing paperwork!

come back

 

There is only one thing worse than paperwork filing and that’s electronic paperwork filing. I have to get all the attachments out of emails and into the appropriate file on the hard drive. And, of course, I can’t tell which is what just by looking at a file name so I will have to open everything up, rename it and sort out where it’s supposed to go. Then what happens when the hard drive dies? I need to get it all onto the cloud somehow. I can’t even justify a trip to Office Works to get some fancy new stationary!

At this stage of the build you will be collecting so much paperwork that you will begin to think they may as well just send you the whole tree (and a variation to pay for the delivery plus builder’s margin).

The latest paperwork we received came with the CDC approval. These are the things you will need to send to your lender to get their final approval.

1. CDC/council approval. The builder needs to send you a copy of the Complying Development Certificate or council approval. We received a scanned copy via email and the original stamped plans by post.

2. Home Owners Warranty. This insurance is the “safety net” in case your builder cannot honour its commitments in the contract. For contracts over $20 000, the builder must provide you with home warranty insurance before taking any money from you and certainly before any work is carried out. It is very important that you check that all the details are correct and that it has been provided by an approved insurance agent. You can find out how to do that and read more information here:

3. Builder’s licence. The builder needs to provide you with a copy of their builder’s licence. It’s important that you check the licence is valid and current. You can do it online: Home builder’s licence check.

4. Builder’s insurance. The builder needs to show you they have insurance to cover all the horrible things that could go wrong. The builder should have:

  • contract works insurance
  • professional indemnity insurance
  • public liability insurance
  • workers compensation insurance

See NSW Fair Trading Insurance for more information.

5. Services connections letter. The builder should supply a letter from the Gas and Electricity provider showing that you will be connected to the services.

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Rumour has it

It has been nearly two weeks since my last post which goes to show exactly what has been happening. Nothing.

We haven’t found out who our customer service officer person is yet. We were sent a generic email saying that our contract has been received. Tomorrow I’m going to do what women supposedly do best- start to nag. We need to get this show happening! So much for “time is of the essence” (we were reminded repeatedly of this when we had to delay signing the contract by 2 days because we were on holidays).

The generic email also has a link in it requesting us to do a survey to give them some feedback. I am always happy to receive these kinds of invitations. I would love to give them some feedback. More than happy.

Of course, I realise that they more than likely file these surveys in the round filling cabinet on the floor.

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In other news, rumour has it that all the blocks in stage 5 have been registered, which is a little bit exciting. We haven’t had official confirmation yet but if it’s true then we will have 21 days to settle on the land. Looks like we’ll officially have a mortgage by the beginning of November.

A solution to the loan problem

Our mortgage broker got back to us yesterday with a solution to our loan problem. Since we’ve already signed all the paperwork for the original loan we’re going to stick with it but essentially decrease the amount of the loan to only cover the cost of the land. Then, when we’re ready to build (and have council approval) we will increase the loan to cover the cost of each progress payment throughout the build. Sounds too simple!

There is a catch though. Basically, we will need to reapply for the construction part of the loan when need it. So we will need to supply all our payslips, bank statements and debts again. Between now and making the application neither of us can quit our jobs, adopt 12 children or run up a debt on a credit card. The mortgage broker lady said all three things had happened to her clients at least once (hopefully the number 12 was an exaggeration!). But, it’s the last one really catches people out. Some people get a bit over enthusiastic and go and buy a whole house full of new furniture for their new homes on store credits with interest free terms. Big no-no. That still counts as a debt.

The other catch is that we will need to pay the deposit (5%) to the builder out of our own accounts as we won’t have council approval at that stage. With the other set up this would have counted towards our minimum deposit for the loan as well, but won’t in this new situation. Probably won’t be an issue. Just means that we will need to borrow 5% less in the long run.

There is an advantage. Because we will now have a 20% deposit for the bank loan on the land (rather than a 10% deposit on the combined house and land) we will avoid paying mortgage assistance until towards the end of the house construction when we’ve borrowed more than 80%. This will save us some dollars. Not a huge amount, but any amount is good.

We will have all the paperwork sent to us next week and it should be sorted before the week is out.

Hopefully, we will also hear back from the DRP next week as well. James called the DRP on Friday to check how things were going and they said they had only just received the hard copy of the plans. It had taken Wisdom a whole seven days to get the plans sent from Narellan to Drummoyne. I know it’s called snail mail but, seriously, they don’t need to use actual snails. And what kind of time warp are the DRP living in if they require hard copies of the plans to be sent to them in the first place?

Today we’re going out to Bunya to meet up with some people from the forum for a BBQ. Maybe we’ll meet a neighbour!

A hiccup with the loan

Since, at times, it feels as though we have absolutely no idea what we’re doing, we’re relying heavily on finding out what others are experiencing. Our main source of this kind of information in the 21st century is, of course, the internet. I’ve never considered myself much of a social media butterfly but I have found myself avidly participating in one particular online forum- homeone. There is a thread on there where people building at Bunya are sharing all their success, advice and questions (here). I do not think we would have made it this far without the people there answering our questions and giving us advice and ideas. Huge thanks!

The reason I’m mentioning this is that last night there was some discussion about home loans and how the different banks do things differently with different loan arrangements. Basically, you would think it is all very much the same from bank to bank, loan to loan, but it is not.

Under normal circumstances you would need one loan for the land and then you might wait a while and get a second loan, a construction loan, for the build. Because we need to sign the build contract before we can settle on the land, our mortgage broker arranged for a combined loan for the land and the build. Similar to what you would get for a house and land package. There are all kinds of benefits for having a combined loan, not to mention less paperwork and fees.

Last night on the forum someone else who is using the same bank as us said that we should double check this is going to work. When they made their application they were told the bank would not release any money until they had council approval for the build. This means that we would not be able to settle on the block of land until we had council approval for the build. And you can’t get council approval to put a building on a block of land you do not yet own. It’s a chicken and an egg.

Chicken and egg

So I shoot off a quick email to the mortgage broker and she confirms. The bank will not pay the first instalment (which is technically paying the balance on the land) until there is council approval for the build.

Fantastic. This loan set up will absolutely not work for us.

I do have to wonder why they have suggested a combined loan when they knew our situation. We explained in detail how we would need it to work and they said it would be fine.

When you are not an expert at something yourself you have to put a certain amount of trust in someone who claims they are. All I can say is double check everything. Twice. That’s right, double check everything twice. Ask stupid questions repeatedly.

It is worth noting that other banks are completely fine with this arrangement. They will pay the land balance first and then will wait until you have council approval for the build before issuing an authority to commence construction and releasing any more money. Just not the bank the mortgage broker set up for us!

The mortgage broker lady is trying to clear it all up for us today. Maybe we will get special permission to pay the land upfront. Maybe we will have to separate the loans. I’ve also asked her to double check that the bank is happy to commit to the progress payment schedule outlined by the builder. I’ve heard that can be an issue too.

I’m just glad we discovered it now and not when we were ready to settle. I have absolutely no idea what people did before Google was a thing.

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