Whether detached homes in greenfield subdivisions on the edge of town, or medium-density houses bunched on urban sections, new houses are popular choices for home buyers.
However, if you're financing a new build, you need a different type of loan, called a construction loan. Canstar explores which banks have the best deals.
What is a construction loan?
A construction loan is structured differently from a typical fixed-rate owner-occupier mortgage. Unlike a typical mortgage, which is paid in one lump sum, a construction loan is drawn down progressively. This means that you increase your borrowing in stages, as you pay for the progress of your new build.
For example, as each stage of your home is completed, the builder will invoice you for the work done. You then submit that invoice to your lender for payment.
The amount available to borrow is based partly on the estimated value of the property upon its completion. And a construction loan usual has a variable interest rate, until the last payment on the house is made, when you renegotiate with your lender to switch to a standard mortgage.
And it's the variable rate that can be the kicker. For variable interest rates are usually higher than fixed rates. At the time of writing, the average floating rate on Canstar's database is 5.76%, while the average one-year fixed rate is 4.73%.
But, currently, two lenders are offering discounted construction loan rates, in addition to cashbacks and other enticements. Below is a breakdown of what's on offer:
ANZ: Blueprint to Build
ANZ's Blueprint to Build offers discounted home loan interest rates and savings on fees:
- Flexible/floating rate discount of 1.25% p.a.
- Fixed rate: 0.60% p.a. discount (applied to new fixed-rate periods only)
- Fee savings on ANZ's Freedom accounts, personal credit cards and Flexible Home Loans
- Duration of deal rate: two years from initial draw-down
- For new residential housing, rental properties and home and land packages
- Up to $5000 cashback for eligible borrowers
SBS: FirstHome Combo
If you're building a first home, the SBS's FirstHome Combo offers:
- Residential floating rate discount of 2.55%
- $3000 cash to help cover the costs connected to purchasing your first home
- $1000 to help cover your first year’s home and contents insurance premiums on policies with SBS Insurance
- $1000 top-up for your SBS Wealth KiwiSaver account(s)
Westpac
As with SBS's first home buyer (FHB) deal, Westpac is offering a cashback of $5000+ for FHBs who take out a new Westpac home loan of $250,000 or more. This includes those who plan to build a new first home.
