Since the Christchurch earthquakes the landscape of Christchurch has changed from previously built homes within established neighbourhoods to new subdivisions with new builds, it could be suggested that we are seeing this trend to accommodate for the expanding housing needs of those living within the region.
In most subdivisions you now have the opportunity to either buy a piece of land and build on it or purchase a house and land package – but what is the difference and what key things should you consider.
House and land packages.
A house and land package is a pre-determined plan and plot of land which you are able to purchase for a set price. The land is usually owned by the builder and you are effectively buying the finished house from the builder directly. This process is an easy option for those that wish to buy a brand new home but don't want to be involved in deciding all the small details. This option makes it easy for those with busy lifestyles or who need a home almost immediately to be able to obtain a new house.
The market is flooded with these types of packages and in most cases there will be a package that suits your individual needs. With this option you pay one set price once completed with no hidden costs or extras that are only determinable as the build progresses.
Buy and Build
The Buy and build option allows you to purchase a plot of land of your choosing. This may be a better option for those that are unable to find land that fits their needs. Once the land is purchased you are able to plan the house itself to create a home that fits your individual style and wants. While this option can take substantially longer from purchase of land to completion of build it allows you the opportunity to design your own rather than being offered a pre-determined plan.
The benefit of the buy and build option is in the details, however it is important to consider how you will finance the property, the builders requirements and what would happen if you went over budget.
Financing
With each option mentioned above you may be required to pay at different times. For a buy and build option you are generally required to make progress payments which are due when certain work is completed whereas the house and land package can be compared to a standard house purchase where you pay the full amount at settlement. Due to this difference it is important to consult with your bank before you undergo this project to determine what you can borrow and if your bank will provide the money when it is needed. Bank commentary suggests that house and land packages or build contracts with a fixed price are preferred as they allow the bank to be certain of the price and that there will not be any additional expenses - more info.
When discussing financing with the bank it is also important to turn our minds to additional expenditure particularly when you undertake the buy and build option. The two main consideration are:
- You will need to ask your bank if they will cover additional
costs and what the additional expenditure might mean for you when
it comes to repayments and interest.
- You will need to consider your financial situation during the build, you may require a mortgage to finance the purchase of the land as well as progress payments and in this situation because you won't be living in the property you are building until completed you may end up paying two mortgages or a rental and a mortgage. We suggest this is discussed with the bank to see if anything can be arranged to assist you during this time.
Building is more than just buying land and planning a house (or purchasing of the plans), and it is important to consult with your bank before you make the decision to buy. We can also assist you with this first step so that you can discuss your options.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
