The progress payment is your friend
Expecting you to hand over the complete purchase price of your home in one hit is unreasonable so instead the cost is split into a few payments over the construction period (phew, I hear you say!).
Your builder will have a progress payment schedule so you can see what payments are due when. This is outlined in your building contract, but you will be able to get this information from your local display centre too.
Progress payment percentages are set by the HIA and basically reflect the costs for that particular stage of construction. So the money due at the slab stage actually pays for the slab, the frame payment pays for the frame and...you get the idea.
Generally, payments are required at the following stages:
- Initial deposit $2000
- Balance of 5% deposit
- Slab 20%
- Frame 25%
- Lock up 20%
- Fix 20%
- Completion 10%
- TOTAL 100%
The main factor you need to think about is how you will fund the 5% deposit, as this is due before approval from your bank or lender. Once you have approval from your lender, they will fund the loan in accordance with the builder’s progress payment schedule.
If you’re a buying a house and land package, you’ll also want to consider combining the loan or having two – one for your land and one for your home.
Overall, your progress payment schedule is your friend. If you are renting while building your home or have another mortgage, it makes juggling your finances easier because you’re not paying interest on the full purchase price of your new home.
Woohoo! And if you’re still living at home, this means you get to save more $$$$. Double woo hoo!
Would you consider bunkering down with family and friends to save money while your new home is under construction?