Some people are naturals with numbers. Others glaze over at the thought of crunching sums. But if you’re buying land and building your first home, there’s no avoiding the financing side of things.
The good news? You don’t have to figure it out alone. Financial advisors and brokers specialise in helping you make sense of it all. Even if you’ve built before, it’s always worth getting advice before you sign on the dotted line.
We spoke to Mark Polatkesen, Director of construction brokerage Mortgage Domayne, to answer some of the most common questions first-home builders have about financing.
Is now a good time to build?
“In my opinion, there’s no better time than now to build a property,” Mark says. “Government incentives currently allow eligible first-time buyers to purchase with a smaller deposit - sometimes from as little as 5% - and without paying lenders’ mortgage insurance (LMI).”
These schemes can be a huge help if you’re eager to get into the market sooner.
What government schemes or grants should I know about?
There are a range of state and federal grants that can help first-home buyers. A broker or your bank can walk you through which ones you may be eligible for, and how they apply to building new.
“Speaking to a broker or your bank is the easiest way to break down what incentives you can access,” says Mark.
What is lenders’ mortgage insurance (LMI)?
LMI is a fee you may need to pay if you’re borrowing more than 80% of the property’s value.
“It’s there to protect the lender if you default on repayments,” Mark explains. “The cost can run up to $30,000–$35,000, so you need to know you can cover it if required.”
But it’s not all bad news.
“Even if you don’t qualify for a scheme that lets you avoid it, paying LMI can actually help buyers get into the market sooner,” Mark adds. “For example, if you’ve saved 10% and LMI costs you $15,000, it might still be worth it. Waiting a few more years to save a full 20% could mean the property increases in price by more than that. Often, it makes sense to buy sooner and take advantage of today’s pricing.”
Do I still have to pay stamp duty if I’m building?
Stamp duty is a government tax charged on property purchases, and it can be significant.
“First-home buyers building new may be exempt, so it’s really important to check the schemes available in your state or territory,” says Mark.
What if I already own a home but want to build?
You may be able to use a bridging loan.
“This type of loan lets you stay in your current home while your new one is being built,” Mark explains. “It usually gives you around a year to sell your existing property, which means you only need to move once rather than renting short-term or staying with family.”
How much can I really afford to borrow?
It’s easy to get swept up in the excitement of a big loan approval - but remember, what the bank says you can borrow isn’t always what you’ll be comfortable repaying.
“The bank might lend you $600,000, but you may only feel comfortable with repayments on $500,000,” Mark says. “Make sure your monthly mortgage fits within your means and lifestyle.”
How do I know which loan type is right for me?
Every lender has different options and features. That’s where brokers add real value - they can compare multiple lenders for you.
“They’ll also help you choose the right loan structure,” Mark says. “For example, many people benefit from an offset account.”
What’s an offset account and how does it work?
An offset account is a savings account linked to your home loan.
“Any money in the offset reduces the interest charged on your mortgage,” Mark explains. “If your loan balance is $600,000 and you have $5,000 in the offset, you’ll only pay interest on $595,000. The more you keep in there, the better - but the money is still available if you need it.”
What insurance will I need when building?
During construction, your builder - like Metricon - covers the build with their own insurance.
Once your home is complete, you’ll need:
- Building insurance (to cover structural damage)
- Contents insurance (for carpets, furniture, appliances and more)
How can I set myself up for success before applying for finance?
Mark recommends:
- Go through your income and expenses and calculate what you can save each month
- Cut unnecessary spending to strengthen your savings record
- Keep a buffer for unexpected build costs
- Do a credit check and address any issues before applying for a loan
“The stronger your financial position, the more you’ll be able to borrow,” Mark says. “Every bank has a different tolerance for credit history, so it pays to know your situation before you apply.”
What’s the most important takeaway for first-home builders?
“Stay sensible and get the right advice,” Mark says. “Research online, but don’t rely on it completely - there’s a lot of conflicting information out there. A broker with industry experience can guide you through the process and give advice tailored to your situation.”
For more information, contact our friendly team today here, or get in touch with Mortgage Domayne on 1300 366 296.
