Buying land - any experiences to share?

[Guest Deb17]

Hi y'all,

Didn't really want to start a new thread as there's bound to have been loads of stuff on this in the past, but was wondering, for those people who have purchased land or have started building out here, what have your experiences been like? How did you arrange finance? Do you get the first home buyer's grant towards land purchase (on PR) and do you only pay stamp duty on the land? (as I've recently read somewhere) Seeing as we are distinctly short on funds :mad:and can't afford a whole house (!) thought we might look at this as another possible option and would be interested to know how others went about it. Any input gratefully received.

[Guest Guzzler&Sas]

Hi,

 

You are right in the fact you only pay stamp duty on the price of the land, and not on the new build, you get your first time home buyers grant when you start your build and after you have paid your first installment to your builder,

 

Guzzler

[Guest Deb17]

Thanks Guzzler, sounds like a cheaper option then!

[Guest Jim Scott]

You do save some stamp duty as it is only charged on the land value, rather than the total price as is the case with an established home.

 

However, you still have to live somewhere while you are building. That often means paying rent + paying interest cost on any money borrowed to buy the land. You also pay interest on any borrowed funds used to build the home (construction). The builder normally charges you the total contract price in a series of progress claims (1) slab down, (2) frame up, (3) external brick work completed, (4) lock up stage and (5) practical completion. (usually 5 in total).

 

You can borrow up to 95% of the value of the land. You may also borrow up to 100% of the construction cost, and the lender assesses their risk based on what they expect the end value of the finished home will be.

 

Here is an example timeline for a buy and build scenario.

 

JULY

Your already renting and you pay Buy land for purchase price of say, $125,000.

Costs will be:

$292 mortgage stamp duty (Govt)

$644 transfer fee (Govt)

$108 mortgage registration (Govt)

$3,830 Stamp Duty (Govt)

$1,000 budget for solicitor/conveyancer fees and other land duties/expenses

Total costs $5,874.

Let's say you pay $30,874 towards costs/deposit and borrow $100,000.

 

AUG - DEC

You spent 6 months deciding on a builder and waiting for them to start construction.

You paid $729 per month for interest only on your loan of $100,000 at 8.75% p.a. = $4,374 for 6 months.

You paid rent for somewhere to live. Say $250 pwk x 26 weeks = $6,500 for 6 months.

 

JAN

The builder finally starts work. Lays the concrete slab (1). Issues an invoice for $30,000 being 25% of the total contract price of $150,000.

You continue to pay your $729 rent + your interest cost is now $100,000 (land loan) + $30,000 (construction loan balance) = $130,000. Total $130,000 x 8.75% = $947 mthly cost.

 

FEB

You pay $729 rent.

No change on construction as the builder isn't ready to start the next stage

You pay another $947 in interest

 

MAR

You pay $729 rent.

Builder now issues invoice for 2nd progress claim, you now owe $160,000 on your construction loan. $160,000 x 8.75% = $1,166 mthly cost

 

APR

You pay $729 rent.

3rd progress claim, you now owe $190,000 on construction loan. $190,000 x 8.75% = $1,385

 

MAY

You pay $729 rent

4th progress claim, you now owe $220,000 x 8.75% = $1,604

 

JUNE

You pay $729 rent

5th and final progress claim, you now owe $250,000 x 8.75% = $1,822.

 

JULY

You move in. No more rent to pay.

Loan is finalised at $250,000 x 8.75%, now principal and interest x 30 years = $1,966 per month.

 

SUMMARY

Land cost $125,000 + $150,000 to build = $275,000.

Govt/other fees cost $5,874

Cash/equity contributed up front was $30,874

Paid $13,000 in rent

Paid $14,211 in interest.

= $27,211 paid out from income for the year

 

 

IF WE HAD PURCHASED

Purchase price $275,000

Govt/other fees cost $12,900 (this is where you saved stamp duty).

Borrowed a bit extra, say $257,000 to cover extra stamp duty differences etc.

Cash/equity contributed up front was the same $30,874

Interest only loan for the first year cost us $1,873 per month

= $22,487 paid out from income for the year

 

This is a bit of a rough and ready guide and doesn't take into account certain variables (usually additional lender fees involved for construction loans + they may charge a higher interest rate during the build). Also, I have ignored mortgage insurance for both examples.

 

Each example has it's own pro's and con's. In my experience, you can expect to be a bit ahead if you build. However, it's not for everyone as building can be stressful + you have to rent in the meantime.

[Guest Deb17]

My word Jim, you worked all that out for me! I'm well impressed.

Thanks for all those figures --- puts a different reality on it...I mean it's OK if you can afford your rent on top of the loan while they're doing all the building work, and the figures you put in were about what we would spend anyway, so I'll definitely be copying all that down and having a serious look at future finances/what we might or might not be able to afford. (Not being the more likely.)

But many thanks again.

[Guest graandjac]

:notworthy:Bloody ell what an answer that was , think everything has been answered there, one thing to add , we are buying a block at the moment we have paid $2,000 deposit and at this point you should get a conveyencer ,Upon settlement you have to pay for the rest of the land within a 10 day deadline (well thats ours). We used Dale at Morphet Vale Conveyencing who has been fab , but he said they can deal with the whole first time buyer rebate thing so no worries there. Good luck Cheers Graham

[Guest Sharron & Andrew]

Hi Jim and thanks for the information.

 

My husband is a bricklayer and has built many houses here in the UK. Iit is our intention to build when we get over there next year.

He has the idea that we can do the same as here and buy the land buy a caravan and live on site while we build (when I say we I mean him)!!! Is this possible or would we be better renting while he builds?