What Not to Do When Building a New Home If You Have a Small Deposit
Once you have decided to apply for your desired home loan product to begin funding the development of a new home, you may want to know what not to do when building a new home if you have a small deposit. Anytime a potential borrower applies for a loan and becomes approved, they will be required to place a deposit of (generally) 20% of the amount being borrowed by their home loan provider. The more being borrowed results in a larger deposit being required. Loan deposits equalling less than 20% results in the loan and interest amount increasing.
If you have a small deposit, you should not buy land to build on and then wait to begin the construction of your new home. Buying land first and waiting to commence construction can risk the vacant land value dropping. Instead, it is recommended to combine the purchase of the land with the construction contract.
Additionally, it is important to not over-borrow if you have a small deposit. You should instead only use the funds that are necessary for the purchase of the land and construction to avoid incurring higher interest rates and being required to pay for Lenders Mortgage Insurance (LMI).
Mortgage House has a wide variety of construction loan offerings to assist you in purchasing land and building your dream home. If you are interested in learning more, reach out to our team for further information and specialised assistance.