The Debate: Should You Buy Or Build Your Next Home?

This is a question many people will ask themselves and while there are advantages and disadvantages in both, there is never a clear answer that suits everyone.

At the end of the day we are all different.

Buying An Existing Home

The real benefit when buying an existing home is that it already exists.

If you find a suitable home at a price that you are happy with then with a pre-approved mortgage you can make an offer with the view to moving into your new home quite quickly. Often the whole process can be completed within a month, but that will depend on firstly finding the right house and then negotiating the price and terms of the sale.

Over recent months the hardest part was finding a house; however the market has cooled a little and people are finding there is more choice and therefore will be more time to make the decision and negotiate.

With an older house you need to consider what changes you might want to make and the maintence issues that might cost you a lot of money. There are the plaster houses that have been tagged “leaky houses” and with those you would need to take extra care and get a professional building inspector to check it thoroughly before committing to the purchase.

To Build Your Next Home

The decision to build your next home will be limited by your budget and finding a suitable section.

Your budget is always going to be important. One of the major problems people having with building a new home is the cost, and especially when you are building your dream home you will come across some great ideas and products that you may want to incorporate; however some of the really good ideas cost a considerable amount. You can make your bathroom or kitchen a design statement which may add value and appeal to your new home, but the cost in these areas can easily blow the budget too.

Think of the long-term cost including things like ongoing maintenance, but also remember that you are required to pay back the money you borrow and with a mortgage there is an interest cost too.

Finding a section that suits can be a frustrating search. The ‘perfect’ section may not exist within your budget and in areas like Auckland the prices people are paying for land is an ever-increasing amount.

A key point that I make to people is you can change a house later, but the land and aspect of the land cannot really be changed so select your section carefully.

Some people are put off building from some of the ‘nightmare stories’ that they may have heard; however there are many very positive stories too.

Finance Your New Build

Many people think getting the finance for their new build is going to be hard, but it is not as hard as it may seem.

As a mortgage broker that has both built our own home recently and financing a lot of new builds in Auckland I have a good knowledge of what the various banks can do. Some banks are quite easy to deal with and some are more difficult. While you may want to get the new build finance from your existing bank this might not be the best option for you – or it might be.

In many ways getting the finance to build a new home is easier than getting a regular home loan. The banks have differing credit policy which means selecting the right bank is important, but The Reserve Bank understand that we need more houses build and so the new build rules are not as strict.

To answer the question of should you buy or build your next home we would need to know more about you and your finances and what you really desire. I would love to have the discussion with you and share some of my own personal experiences which may help answer some of your questions.

Why New Build Houses Make Good Rent Investments

One of the more serious decisions you’ll need to make as a property investor is whether to invest in new build houses or existing houses.

As a New Zealand mortgage broker I hear all sorts of stories and hear about some older houses that have cost people a lot to maintain. For this reason building a new house is definitely something that you should consider and especially in places like Auckland where houses are going to cost more, but where house prices are rising too.

Of course there will be a lot of people with their own opinions, but in today's finance environment we think that new build houses may make better rental investments.

We explain why we say this and then you can make your own decision.

Your Tenant Prefers A New Home

In most cases, new build houses are built better and to higher standards of quality than homes built a few years ago.

They have better features such as ensuite bathrooms and heat pumps. Properties built today benefit from being more environmentally friendly. They have energy efficient windows, better insulation, and efficient heating systems which mean lower running costs for the people living there.

Most new build houses today will be built on smaller sections, but for a rental property that is typically quite good as it means less area to look after.

Having a house that is appeals to tenants means you should be able to find a tenant more easily, you will typically get a higher rent and the tenants should stay in the house for longer.

Lower Repair and Maintenance Costs

New build houses benefit from lower maintenance bills too and they should come with a builder guarantee. You shouldn't have an oven or hot water cylinder that suddenly packs up, and things like roofs will have many years before you need to replace them.

You will generally find that tenants will look after a new property better than an older one too.

New Build Houses Are Easier To Buy

With the recent changes to the LVR rules, a property investors now need a 40% deposit when buying an existing house in New Zealand with bank finance; however new build homes are exempt from those rules and therefore you do not need the same size deposit.

Some banks will allow you to buy a new house with a 20% deposit and some will even go as low as a 10% deposit.

As an investor you may be limited by the cash available to invest, and therefore being able to invest in more property for the same actual cash investment makes sense. If you had $200,000 to start a property investment plan, then applying a 40% deposit means you can buy a house worth $500,000 whereas if the deposit required was 20% then you are able to buy property worth $1,000,000.

This often means you can buy two properties rather than one, and this gives you the ability to spread your risk, gain from larger capital gains and gives you the ability to sell a property should you ever need to. We are new build finance specialists and can help you get your new investment property.  

More Kiwis Are Building A New Home

In a real estate environment where there is a shortage of properties for sale (listings) and so many going to auction it is not surprising that more people are now looking at building a new home.

It is a fact that Kiwis love property and most of us dream of one day building our own new home, but to many of us this is just a dream or something that we think we might do later in life. What many people don’t know is that it is easier to get new build finance in many cases which makes building a very viable option.

Building New Shouldn’t Be Hard

Some people expect that building a new home is hard.

Yes, there are some stories of people that have had problems with their new build, and there are a lot of people that will have experienced delays; however when you use a reputable builder or building company and plan properly then any problems can be minimised.

My name is Stuart Wills and I am an Auckland mortgage broker, but we have also recently finished building a new home in Hobsonville Point in North West Auckland. The experience with the building company was good and there were no major issues with the build either and the house was even completed within the expected timeframe. Of course being a mortgage broker we had the finances arranged in advance so our new build finance went through without a hitch and with the way we structured things it meant we were able to shift into our new house on practical completion rather than having to wait for the Auckland Council to issue the code of compliance. 

When most of us decide that building a new home is a good idea we are entering into something that we have no experience with.

With many new builds there are a lot of decisions to be made; however in many new developments the building companies have designed house and land packages that are planned so have limited options or choices for you to make.

Advantages Of A New Build

There are many advantages of a new home.

The major advantage that people perceive is that you get to build a house that suits your lifestyle.

While this can be true, most of use are limited by our budget and how the property developer has designed the area. New suburbs like Hobsonville Point are quite structured, whereas other areas leave more options to the individual people. There are pro’sand con’s for both – a planned development means your choices are limited, but it also means you know exact what is being build next door and details like where the windows go are planned to offer maximum privacy for everyone.

There are the physical advantages with a new house too.

Just like new cars and more economical and better featured than older cars, the same can be said about houses. New builds are constructed using modern materials and building practices meaning the houses are a lot more energy efficient and often planned better to take advantage of the sun and light to make the living environment more pleasant for living in.

How often have you been in an old villa which may have a lot of character, but also has a lot of drafts and dampness. If you look closer many old villas have rot that needs repairs or the owner has made a lot of effort and spent a lot of money to maintain the house.

Then there are the leaky homes – the last thing you want to experience is a leaky home!

There are many advantages of having a new home built with a warranty too.

Do Your Research

You hear of people that get stressed when building a new home, and when you hear from those people the issues seem quite real too.

Generally stress is caused by unexpected things happening.

Most new residential building projects these days have had a lot of planning. The building companies have very good planning and project management software so they can plan and track each each and every step of the project. The two areas that are often out of their control is the dealing with Councils and the management of trades people.

Where people often feel let down is with how the project manager or building company communicates with their customer – with you.

Doing your research and setting realistic expectations will help you through the build process. Part of this process should be to get the right people with experience that can offer you good advice like your mortgage broker and new build specialist Stuart Wills.

But who can help you with this?

Arranging The Best New Build Finance

Many people will just go directly to their existing bank to source the new build finance, and in many situations the person at the bank is able to arrange some finance which seems okay.

The problem is in many cases the finance that has been approved is not really okay.

When you are building a new home there will be enough for you to do without having to worry about the finance and dealing with the bank. As an experienced mortgage broker it would be easy to say “I know about new build finance” but having recently been through the building process myself too I can say I really know about the whole building process including the new build finance that is required.

Unlike many other people that source new build finance, we are experienced Auckland mortgage brokers in the true sense and have access to most banks and non-bank lenders. We are happy to work with your existing bank to ensure that you get the finance that is needed and at a competitive rate too.

You should contact the Kiwi Mortgage Man, Stuart Wills at The Mortgage Supply Company.