Embarking on the journey of homeownership in Perth presents a myriad of choices.
Each option has its financial intricacies. In this article, we'll explore the differences in financing these choices, helping you make an informed decision.
House and Land Package Loans: An Overview
House and land package loans are a unique financial product tailored for those looking to purchase a combined deal of both land and a home to be constructed on it. Please not that this is different from an off the plan purchase.
This dual-purpose loan simplifies the process by combining two significant expenses into one package.
- Staged Payments: Unlike traditional home loans, where you receive the entire loan amount upfront, construction loans are used for house and land packages that release funds in stages, aligning with construction milestones. This means you only pay interest on the amount drawn down, potentially saving you money.
- Fixed Price Contracts: Many house and land packages come with a fixed price contract, providing clarity on costs. This can reduce the risk of unexpected expenses, offering peace of mind.
Financing an Existing Home
When you're buying an existing property, the financing process is more straightforward.
- Single Loan Disbursement: The entire loan amount is typically disbursed upon settlement. You start paying interest on the full amount immediately.
- Valuation Focus: Lenders will focus on the valuation of the existing property to determine the loan amount. This valuation ensures the property's worth aligns with the loan amount.
Building on Separate Land: A Two-Pronged Approach
Choosing to buy land and then build on it separately can be a more complex financial journey.
- Two Separate Loans: Initially, you might take out a land loan, and once you're ready to build, you'd transition to a construction loan. This could mean two sets of loan application processes, fees, and potentially varying interest rates.
- Variable Costs: Without a fixed package deal, construction costs can vary based on builder agreements, design changes, and unforeseen challenges. This requires diligent budgeting and often a buffer for unexpected expenses. (Note: Novus Homes offer fixed price contracts should you choose to build with us).
Key Considerations When Choosing Your Path
- Interest Rates: House and land package loans might offer promotional rates to entice buyers. However, always compare these with standard home loan rates.
- Flexibility: Building separately might offer more design flexibility than package deals, but it often comes with increased responsibility to manage the project.
- Deposit Requirements: Some house and land packages offer lower deposit options, making it easier for first-time homeowners. In contrast, separate land and construction might have varied deposit requirements.
Novus Homes Will Take The Stress Out Of Your Building Worries
Whether you opt for a house and land package, an existing property, or a separate land and build journey, understanding the financial landscape is crucial.
Here at Novus Homes we will guide you through ever step of the way and help you understand what is the best option for your unique situation and then point you in the right direction regarding a financial adviser or a mortageg broker that would be the best fit for you.