Building a new home sounds great, but it can be complicated. There are finances to shuffle, builders to manage and inevitable disappointments to navigate. Buying an existing home has its flaws too – they can often be old with maintenance and repair costs.
A house and land package home involves none of that and can be a great solution for your finances, your lifestyle – and your stress levels.
But as with anything, there are pros and cons to weigh up before you sign on the dotted line. Here’s what you need to know about house and land packages.
House and land package – pros
Low maintenance costs
When you buy a house and land package home, it’ll be brand new come move-in day. You’ll get a modern home with little-to-no maintenance costs –a huge saving when you’ve got a mortgage to pay.
One of the greatest benefits of a house-and-land package is how easy it is to manage. In most cases, you’ll work with a developer instead of people in every profession – builders, the council and architects – so things are kept simple and stress-free.
Smaller deposit required
You’ll need a 20% deposit for a house in New Zealand. The average house price just hit $1 million, so that’s a lot of money. With a house-and-land package, as a first home buyer you’ll only need a 10% deposit – making it much easier to get your foot in the door.
Less interest paid
You’ll take out a construction loan to finance a house-and-land package. With this type of loan, you’ll draw it down in stages throughout the build. That means you won’t pay interest on the full amount until your home is complete.
Whatever design you choose for your home, it won’t be the first your provider has built. That means they’re familiar with the design and have streamlined, efficient systems in place for a speedy turnaround – so you can move into your new home faster.
Use KiwiSaver funds
If you’re a first home buyer, you may be able to use your KiwiSaver funds for the deposit on your house and land package. On top of that, you might be eligible for a HomeStart grant, which could give you up to $20,000 to go towards your home.
Bundle your loan
Your finances are split in two when you build your own home – the first transaction for the real estate or the land, and the second a construction loan to finance the build. With a house-and-land package, these loans are bundled together – and all your finances are in one place. Because you agreed on a set price before the build started, you already know exactly how much lending you need. That’s appealing for the bank, which will be more likely to lend to you.
No payment until move-in day
Depending on your provider, it’s likely your mortgage repayments won’t start until the build is finished and you’ve got the keys to move in. That buys you more time to save, carefully budget and stash some pennies away – taking away some financial stress while you’re still paying for your current accommodation.
House and land package – cons
No extras included
Generally, a house-and-land package home won’t come with fixtures like curtains, blinds, or landscaping. You’ll need to factor in these extra costs when planning your budget, as well as the inconvenience of having to install them yourself.
Most house-and-land packages are in new areas to accommodate population growth. While a brand-new neighbourhood sounds nice, it could still be in the development stage and not have all your necessities like schools, supermarkets or public transport facilities. It could also lack character and be without trees, parks and nature.
Limited location options
House-and-land package homes are generally built in new areas or subdivisions where there is land available. That means they’re usually far out of cities and central suburbs – which could be isolating with a long trip to work or school.
Developers want to get bang for their buck. For that reason, they’ll probably cram as many houses onto the land as possible to make more profit. That could mean a less-than-spacious home for you, with little to no outside area.
Restricted design choice
If you work with an independent architect to build a new home from scratch, you’ve got a blank canvas free to paint as you please. That’s not the case with a house-and-land package. You’ll probably have only a few designs to choose from, without the luxury of easily changing things you don’t like.
Rent Payment along with mortgage payments
If you are a first home buyer, this may mean you will need to continue to pay rent and live in your current property until the new property is complete and ready to move in. Therefore, you will need to pay both the rent and the mortgage payments on the loan taken for the land and construction at the same time.
Think outside the box with a house-and-land package
If you’re desperate to get on the property ladder, building a home or buying an existing one aren’t your only options. A house-and-land package can be a great way to get your foot in the door, and it comes with many benefits. But there are cons to be wary of too – like having little choice on the design or location of your home. Whatever you choose to do, it’s an option to weigh up and could be your ticket into the property market.
Thinking of buying a house and land package? Start in the right place and speak to a Global Finance mortgage broker today.
**These are general guidelines and are by no means a reflection of bank or lending policies