can’t find the home of your dreams or want to specify exactly how your home
will look, you might choose to build your own home. A ‘Building Loan’ is
simply a structured approach to paying out a home loan.
repayment only begins when the loan has been paid out in full, it is
important to note that interim interest will be charged for amounts paid via
progress payments from the moment the first payment is effected. These interest
amounts are debited to the home loan account, even though repayments
are not due yet.
BENEFITS OF BUILDING LOANS
FOR A BUILDING LOAN
payments - normally 3 or 4, made to the builder at intervals during
construction - allowing you to pay only for the work as it is completed.
only starts when the loan has been paid out in full.
repayment options are available ─ including debit orders, electronic transfers, cash or cheque deposits,
salary deductions or stop orders
reputable builders, registered with the National Home Builders Registration
Council are allowed, ensuring that your home is built according to the SABS
standard and carries the necessary warranties.
Normal qualifying criteria applies and
the stand upon which building will take place, must be within a proclaimed suburb
addition. the following documentation is required
specifications (a standard bank form which needs to be signed).
- Copy of
Provisional Plans or Sketch Plans.
quote or tender.
- Waiver of
Builder’s Lien (required before first progress payment).
What is a
payment is a payment released by a bank assessor - authorised by the customer -
to pay the builder, or another elected party that needs to be paid, at certain
stages of the building process for work completed. Before any payments are
made, the bond must be registered in the Deeds Office. Normally, 3 or 4
‘progress payments’ are made to the builder during construction - the first
usually after foundation, the second at window height, the next one at roof height
and the last upon completion of work.
the typical payment process?
progresses, requests for payment will be submitted by the builder. You will
then have to submit a progress payment request to the bank. After the bank
assessor has assessed the cost of the work carried out, payment will be
authorised, with consent from the customer.
assessor will calculate the amount available. The bank will only reimburse
money for work completed or materials actually used and will retain adequate
money for completion. Material purchased that does not yet form part of the
structure will not be taken into consideration when this calculation is made.
interest is interest charged on the outstanding balance from the date of the
first debit on your home loan account to the date of the final
progress payment - after which date the normal home loan repayment
Even though repayment is only required after the final progress payment, it is
advisable to cover these costs in the interim. Interim interest can mount up
during the construction period and, if it is not paid, a portion of the final
progress payment needs to be found from other funds as the interim interest
will have utilised part of the loan that was granted.
details on the various costs involved in buying a property go here
- Never sign
a blank progress payment request before inspecting the house to satisfy
yourself that it has been completed to your satisfaction and per the contract.
- Always be
careful with a final payment request, as this advance should only be signed
when you are satisfied with the completed dwelling. Do not sign if you are in
Occupation Certificate issued by the local authority will be required prior to
the final payment being made to the builder. This will insure that the property
has been inspected and all requirements by the local authority have been met.
building/alterations are to be completed within the stipulated period as per
the loan agreement, failing which the bank reserves the right to withdraw
For more detailed information on Finance issues go here
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