Kiwisaver/banking/lending gurus on building first home?

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Forums › Finance and wealth management › Kiwisaver/banking/lending gurus on building first home?

Disrespective

1886 posts

Uber Geek

#153842 9-Oct-2014 15:04

My girlfriend and I are looking at the viability of building our first house rather than buying.

I am an architect so am uniquely placed to be able to do a lot of the grunt work for free and get good prices on things, but have absolutely no idea on the logistics of Kiwisaver/the banks.

I figure if I can get our building costs down to about $2k per square meter and am smart with the house design I can get three beds, two baths and plenty of storage (no garage) into 140m2. That’s a total build of $280k. Lets say $300k with some contingency. Then I should be able to find more than enough land for a small home in wellington for ~$150k. That gives me a total of about $450k for a brand new (architecturally designed, if that makes a difference at this price point) home. We would have to spend that much to get an old half renovated villa which might have the same bedrooms but would be 70 years old.

For a point of reference spec builders are quoting around $2k-2.2k per square meter for a higher end home. My office is getting quotes back from the QS at about $3.5k for what we consider a lower end home. Just to be clear we work in the $1M-$10M build price area.

I have only been a kiwisaver contributor for 12 months (I was always a bit sceptical early on) and my gf has been a contributor for 6 years or so. We won’t look to start building for another 12-24 months so I should be able to get some money from kiwisaver at that point. Nor do we currently own any land. We should hopefully have about $70-90k saved by the time we build though.

Can kiwisaver be used to first buy land and then build?

How do banks like this? I assume the bank would want consented plans on a site before they lend to buy it? This is pretty hard to do as you can’t get a consent without first owning the land. I am working on some plans which would be fully consentable without looking at the foundations. I’d then potentially just need an engineer to design them and i’d be able to get consent within 20 working days.

Has anyone actually bought land with kiwisaver before?

I’m happy to discuss my design ideas further if anyone is interested but i’m primarily focussed on whether it is a viable option for us in regards to the banks/kiwisaver.

OT: We’ve been together 10 years and have a child, and yet she persists on making me call her my girlfriend… *sigh* At least if we build I can delay the purchase of a ring a little bit longer ;)

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7384 posts

Uber Geek

#1150791 9-Oct-2014 15:13

Apparently you cannot use Kiwisaver to build a house on land you already own.

http://www.hnzc.co.nz/buying-a-house/buying-a-home-with-kiwisaver

It sounds like you are going to be in a nasty catch 22, you cannot get consents ( and hence a mortgage) until you purchase the land, but once you do purchase the land, you will be unable to use kiwisaver funds to pay for the build....

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Disrespective

1886 posts

Uber Geek

#1150799 9-Oct-2014 15:24

I read that to mean that if we already own the land then we are out of luck. However, if we need to use kiwisaver to buy land and build, in one movement, (in essence with a single mortgage) we would be OK. Looks like I need some more definitive clarification though, doesn't it?

lxsw20

3198 posts

Uber Geek

#1150805 9-Oct-2014 15:36

You can use Kiwisaver to build your first home, my workmate has used the kiwisaver funds to help buy the section.

nickb800

2699 posts

Uber Geek

Trusted

#1150809 9-Oct-2014 15:47

National recently announced their 'KiwiBuild' policy which essentially doubles the Kiwisaver first home buyer subsidy if you are building new. As with the first home buyer subsidy, it's only for those that have been contributing to Kiwisaver for at least 3 years, so your GF could use it, but you wouldn't receive a subsidy - you could only withdraw your and your employers contributions to date

heylinb4nz

656 posts

Ultimate Geek
Inactive user

#1150822 9-Oct-2014 16:30

Here some helpful advice once \ if you gain the mortgage and start building.

- hire purchase on interest free as much as you can (carpet, appliances)
- for non HP purchases get an airpoints visa card and put as much things on that as possible (lighting, bathroom, electrical)
- wire for network and speakers, much easier with gib off
- consider a central point for terminating all the network cables, fiber etc, where you wireless can cover whole house (ie understairs cupboard)
- dont skimp on powerpoints.....you can never have enough power points !!!

As for paying it off, get a flexi mortgage with overdraft and have both your incomes going straight onto this, use your credit card for as many expenses as you can (rack up airpoints and save interest)

We have blitzed through our mortgage over the past 5 years doing this, and on average have 2-3 free hotel nights a year thanks to the Airpoints...well worth the $80 annual fee.

joff_nz

446 posts

Ultimate Geek

#1150855 9-Oct-2014 18:14

Whatever you read in here, remember that what works for others will not necessarily work for you, the above post for example has some great tips but if someone wasn't disciplined with money could lead to ruin. Speak to a recognised financial advisor. Your banker, a mortgage broker, etc who can look at your individual situation and suggest something specific to you.

Also what parts of Wellington are you looking in to get a half decent section for $150k?

I have no specific advice around kiwisaver etc as I'm not familiar with it.

mattwnz

19389 posts

Uber Geek

#1150905 9-Oct-2014 19:51

In general in the suburbs of Wellington, you can buy existing houses far cheapar than they would cost to rebuild. I am talking the Hutt Valley areas, where the insured rebuilt costs can be more than the entire CV, which includes land. I think you will be very lucky to build for 2200k.sqm, to a spec you will probably be happy with. It may depend on how simple the forms are and the types of materials you are using. It is normal when you build, that you tend to upspec everything anyway which puts the price up. eg extra insulation, double glazing with thermal breaks. I am designing a house for my brother at the moment, and they want about 220sqm inc double garage. 180sqm for the actual house which includes, 4 bedroom, two living areas, one bathroom and ensuite, for around 400k. That will be a stretch.

Disrespective

1886 posts

Uber Geek

#1150906 9-Oct-2014 19:57

Trust me, I know it won't be simple. I'm not expecting fancy. I just don't see the reason why I should buy something old I don't love when I can build something new I do love, even if it is smaller.

Lurch

1054 posts

Uber Geek

#1150911 9-Oct-2014 20:14

Nationals new policy is called homestart and doesn't come into being until the 1st of April 2015 (April fools? ;-)). So will be sitting on the fence until then, finally I might be able to purchase a house. The below link has more reading :-)

https://www.national.org.nz/docs/default-source/PDF/2014/pr-attachments/homestart-q-a.pdf?sfvrsn=0

mattwnz

19389 posts

Uber Geek

#1150963 9-Oct-2014 21:56

Disrespective: Trust me, I know it won't be simple. I'm not expecting fancy. I just don't see the reason why I should buy something old I don't love when I can build something new I do love, even if it is smaller.

I think the main reason I wouldn't go for something old, would be due to lack of insulation and double glazing. Also you have unknowns like rewiring, replumbing, repiling , reroofing etc. Sometimes it can be cheaper to build than, to refurbish. I would like to see the government drop GST on new builds to help NZ build more homes, which would bring the price down alot. But there are still some nice old buildings out there, and some very nice architecturally designed houses from between the 60's - 90', designed by well known architects, which are built to very high spec and well designed, which are very good value. Although you do have to watch out for the black plumbing in the 70's-90's ones. Would be interested in seeing your designs. I graduated from Vic with a BArch myself.

chevrolux

4962 posts

Uber Geek
Inactive user

#1150967 9-Oct-2014 22:18

I looked in to building my first home and the bank was the stopper for me. I had just over a 20% deposit once KiwiSaver was used but the bank wouldn't give me a mortgage for bare land and a building budget without a minimum of a 50% deposit.
That was 5 years ago though so things have probably changed a bit.

Edit: Should note too sorry, they referred to being able to pay for 50% of the entire project. Not just 50% of the land cost.

mattwnz

19389 posts

Uber Geek

#1150984 9-Oct-2014 22:39

I know someone who wants to build on some land their parents own, but they weren't allowed to withdraw their kiwisaver for it, as apparently you need to have the land you want to build on in your own name. Certainly they don't make it easy for young people.

Disrespective

1886 posts

Uber Geek

#1151079 10-Oct-2014 09:34

Lurch: Nationals new policy is called homestart and doesn't come into being until the 1st of April 2015 (April fools? ;-)). So will be sitting on the fence until then, finally I might be able to purchase a house. The below link has more reading :-)

https://www.national.org.nz/docs/default-source/PDF/2014/pr-attachments/homestart-q-a.pdf?sfvrsn=0

Thanks for linking that. I have copied the relevant info for me below so others can see.

11. What conditions will there be for qualifying as a “newly built house”?
In cases where the relevant dwelling has not yet been built at the time the first home buyer applies for the HomeStart grant, Housing New Zealand Corporation must be reasonably satisfied that the new dwelling will be built within the following timeframes and that the first home buyer has sufficient finance available with which to complete their dwelling or purchase:
• When purchasing a vacant residential section, a new dwelling must be built within 12 months of the purchase being settled;
• When purchasing a house and land package off the plans, a new dwelling must be built within 12 months of the date on which the first home buyer entered into an agreement to purchase the house and land package;

This leads me to believe that so long as I have the right deposit, meet the other criteria, and can sufficiently prove the house will be finished within 12 months then I should be eligible for the scheme.

Lurch

1054 posts

Uber Geek

#1151096 10-Oct-2014 09:50

Disrespective:
This leads me to believe that so long as I have the right deposit, meet the other criteria, and can sufficiently prove the house will be finished within 12 months then I should be eligible for the scheme.

That's how a I read it, should be able to afford a better house through building than purchasing an existing. Just the long wait until April, but that will boost my kiwisaver more.

Disrespective

1886 posts

Uber Geek

#1151137 10-Oct-2014 10:28

mattwnz:
Disrespective: Trust me, I know it won't be simple. I'm not expecting fancy. I just don't see the reason why I should buy something old I don't love when I can build something new I do love, even if it is smaller.

I think the main reason I wouldn't go for something old, would be due to lack of insulation and double glazing. Also you have unknowns like rewiring, replumbing, repiling , reroofing etc. Sometimes it can be cheaper to build than, to refurbish. I would like to see the government drop GST on new builds to help NZ build more homes, which would bring the price down alot. But there are still some nice old buildings out there, and some very nice architecturally designed houses from between the 60's - 90', designed by well known architects, which are built to very high spec and well designed, which are very good value. Although you do have to watch out for the black plumbing in the 70's-90's ones. Would be interested in seeing your designs. I graduated from Vic with a BArch myself.

Yeah, exactly. And Wellington is full of old cold damp buildings. I have to make sure I buy land on the 'right' side of the hills or else the house would never get sun in the winter... not ideal.

I have been working on a few renovations around Wellington in the last wee while and a few were architecturally designed and are terribly detailed. Mostly because architects pre 1995 were often times just as cowboy as the builders. I'm dealing with plenty of leaky details from well known architects... I don't need that sort of trouble in my life right now, even if it is a neat status symbol in my industry to own a well known architect's design. Too many unknown variables when not building new or buying near new.

When did you graduate? I'm not that far out of Uni (still haven't gotten around to registering) but was draughting for a few years before so think I know my way around. I recently worked on a number of affordable housing designs for the Axis housing in Hobsonville so think i'm pretty current with my cheap home ideas, heh. My designs and details are a bit more evolved from that but still similar.

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