We recently wrote about the increase in new build lending announced by ANZ Bank and commented that while we do use them to finance new builds we consider them to be just one option and like any bank or non-bank lender they need to earn your business.
It was therefore pleasing to see the bank make some changes to their lending policy.
The Changes To Improve New Build Lending
The following changes apply to building with a new fixed price contract (excluding kitset, re-locatable and pre-build) applications only.
The cost overrun allowance for construction lending applications has now reduced from 15% to 10%. As new build finance brokers we have always argued that the purpose of having a fixed price contract is to minimise cost overruns and therefore felt 15% was excessive as this often impacted on how much people could borrow. Reducing this to 10% is more in line with what actually happens – ie: most people will still over-spend a bit even with a fixed price contract as they will find things that they want to improve on or add.Progress valuations during the build are now not required where the contract amount is $600,000 or less and LVR is 80% or less. Previously valuations were required on build costs over $450,000 irrespective of the LVR. With the current building costs this change will help a lot of people as valuations are another cost which adds to the overall cost of building a new house.
Understanding Banks Policy For New Build Finance
As a mortgage broker that specialises in new build lending I always try to keep abreast of what the different banks lending policy are. Each bank has slightly different policies and they are constantly being reviewed and small changes are made.
If you are looking to arrange finance for a build project then feel free to talk to me about your specific requirements and I can suggest which bank might best suit, and also how best to structure the finance. It may be the best bank is the one that you already use, or possibly there is a bank that is going to suit better.
