Overwhelming - the first word which comes to many a person's mind when asked to think about what their current financial position is.
A lot of the time, things which we perceive as scary or overwhelming are simple and easily achievable, if we have all of the facts.
Because we believe in putting you in the driver's seat when it comes to building your home,
we've put together a guide to financing your first home.
1. Where are you at right now?
In order to know what you can get, you need to know what you have. Start off by understanding your current financial status; this means pulling together the below items;
➕ your current salary or income as well as a partner's (if you have one) salary. This gives you your total household income;
➕ how much money do you have in savings which you plan on contributing towards your home deposit, be it small or large, you’ll be pleasantly surprised at your options;
➖ your monthly costs- think rent, groceries electricity and gas, fuel, phone bills etc;
➖ your current debts - loans, credit cards, buy-now-pay-later applications (i.e. AfterPay) and any assets which cost you;
➖ ongoing direct debits, such as the gym, Netflix and any other subscriptions;
➖ any other expenses like car registration, insurance fees or items which occur throughout the year;
2. Get some advice.
Once you understand your finances a little better, you can speak to your New Home Consultant with a clear idea of what you can save and spend each period (week/ fortnight/ month etc.). Your consultant will then work with you and a broker* on your next steps. Your broker will advise you on what you can and can't afford in terms of your new home-build and your consultant will always be present for support throughout the process.
Once your broker has the full picture they will provide some options which may be something like:
Based on your budget (or borrowing capacity*) you can afford to
🖊️ build a five bedroom house in Baldivis OR
🖊️ build a three bedroom house in Treeby OR
🖊️ build a smaller design but on a bigger piece of land with a larger backyard.
Together, with your Consultant and Broker, you can find the option that will best serve your priorities finance-wise but with your lifestyle values in mind.
We like to keep it in the family; find out about our inhouse broker, Westgate Finance. Owned and operated by Summit Homes Group, so you can rest assured that our priorities are all in one place.
3. Stick to the plan!
Once you and your broker have decided on a plan that works for you with the support of your consultant, stick to it! Buying and building a home is a big commitment (we know) and it requires a certain level of diligence around spending and saving. Your consultant will be able to give you some guidelines based on the option you have chosen and then it's up to you to maintain your side of the bargain and save as much as you can for the exciting process you're about to embark on. Looking for some budgeting tips and tricks? Here are some recommendations to help you:
Podcasts: She's On The Money
4. Locking it in.
Once you have a new sketch in your hands, giving you a great idea of what life is going to look like once you're in your home, it's time to pop a deposit down to lock in your land in a suburb you love and a home-design that fits. Generally land deposits start from $1,000.00 and your home deposit will start from $3,000.00 (Keystart vs Lender will vary) which goes towards the total price of your new home.
5. It's getting real!
Next steps include your Preparation of Plans Agreement (PPA) which outlines the details of your build and finalised design, with all of the financial information and essentially is Part A of making it official. All your land and home design details are then submitted to the bank for formal approval and once we have this we are well and truly cooking with gas. Next step is Prestart!
Between signing your PPA and receiving your final contract, there may be price increases which happen due to fluctuations in the industry. At the moment Australia-wide is experiencing a building boom, which means certain trades and materials are in increasing demand and price rises may occur.
At New Generation Homes, we have a guaranteed PPA period of 120 Days. This means that for three months after your PPA has been signed, no price rises will occur. The industry standard is usually 45 days where you can experience an increase. This means you can afford to feel more confident in your finances when you build with New Generation Homes.
If you want to understand the current challenges and opportunities in the building industry, you could listen to this interview which aired on 6PR with the Executive Director of the WA Housing Industry, Cath Hart.
6. Slab down, money down.
After you've completed your Prestart meeting where you can essentially 'add stuff to cart' with pretty lighting, cladding, tiles (the list really can go on, check out the Style Studio if you want to get a better idea), you may have a variation to contract. This means that if you have included any thing additional in your Prestart process, like extra power points, these additional amounts will be accounted for in your contract and the additional amount for the loan from your lender and will need to be approved.
We'd recommend keeping aside a nice little kitty of spending money so you can afford to include some of the extra fun stuff at this stage, from about $5,000.00.
Next up, it's time for a slab party! We've poured your precious block and this is when 10% of your contract price is due and your payments commence (don’t worry, your broker and builder will help take care of these progress payments for you).
At New Generation you have a direct line of communication to your Construction Supervisor who will update you on these stages as well as keep your Customer Porthole up-to-date so you know when these payments are due:
💰 Slab poured - 10% of the contract value
💰 Walls up - 30% of the contract value
💰 Roof on - 20% of the contract value
💰 Lock up - 20% of the contract value
💰 Practical completion - 100% of the contract value (full repayments begin here)
The advice given here is general in nature and does not take into account your personal financial circumstance. Consider speaking with a finance professional to ascertain your next steps and capabilities. Keystart loans are subject to a different set of steps and can be explained to you by one of our New Home Consultants.