Financing Your Upgrade to a New Build at Sage

Upgrading to a brand-new home is an exciting step, and at Sage, we offer the perfect canvas for your dream home in the heart of the Moreton Bay region.

But before you embark on this journey, it’s essential to understand how to finance the purchase of your land and the build that will transform it into your dream home. Financing a new build comes with some unique considerations, especially when compared to purchasing an established property. In this blog, we’ll walk you through everything you need to know about financing your upgrade to a new build at Sage, from budgeting to securing the right loan options, so you can confidently move forward on your path to inspired family living. 

Get Clear on Your Budget

Before you jump into the exciting world of new builds, it’s important to set a realistic budget. Building a new home is a big financial commitment, and knowing exactly how much you can borrow will help guide your decision-making process. Take time to assess your financial situation, including your income, expenses, and any existing debts. Many financial institutions offer online mortgage calculators that make it easier to determine your borrowing capacity. 

It’s also crucial to factor in your desired lifestyle. While a new home is a wonderful upgrade, you still want to maintain your day-to-day comfort and activities. By understanding your monthly mortgage repayments and ensuring they fit within your budget, you’ll have a clearer idea of what’s achievable while still leaving room for the enjoyment of your new community. 

Organise Your Deposits

When building a new home, there are two types of deposits to consider: 

• Developer Deposit: To secure your homesite and begin building your dream home at Sage, a payment of $2,500 alongside the submission of an Expression of Interest (EOI) is required. The balance of the 5% deposit is due within 5 business days of the contract of sale being fully executed. This deposit is considered part of the total deposit required for your mortgage and will be credited toward the overall deposit that you need to provide to the lender. 

• Mortgage Deposit: This is the traditional deposit paid to the bank, typically between 5% and 20% of the property’s value. The 5% deposit paid at the time of signing the contract of sale is considered part of the total deposit required for the mortgage. This amount is credited toward the overall deposit the buyer needs to provide to the lender. If your deposit is under 20%, you may need to pay Lender’s Mortgage Insurance (LMI), so factor that into your budget. 

Once you have both deposits sorted, a mortgage broker can guide you through the approval process, confirming the cost if the LMI if it’s applicable to you, and ensuring everything is in place for a smooth transaction. 

Understand Instalment and Repayment Options

When upgrading to a brand-new home with a house and land package, your loan is known as a construction loan, and its repayment structure differs from that of other property types. For land purchases, the first step is to settle the land, which means your loan repayments will begin as soon as settlement is complete. This means you will need to budget for repayments on the land amount from day one. 

Once the land is settled, the construction phase will begin. Based on your construction contract with your chosen builder, there will be staged repayments throughout the progress of your build.  

An example of a progress payment schedule might look like this: 

Source: Queensland New Homes Construction Contract (Oct 2015) 

Progress payments allow you to draw down funds from your construction loan in stages, typically aligned with key milestones during the construction period. These payments are generally managed by your bank, ensuring that your builder is paid progressively as work is completed. 
 
Importantly, interest is only charged on the funds that have been drawn down, not on the entire loan amount from the outset. 

Before the final progress payment is released, the bank requires a satisfactory valuation from an independent valuer. This valuation ensures that the construction has been completed according to the original plans and specifications submitted when the loan was approved 

Your full loan commitment will come into effect once the build is finished, which will include both principal and interest payments. 

It’s crucial to understand the timing and structure of both the land repayments and the construction loan, as this will help you manage your finances effectively and ensure your budget can accommodate both costs during the building process. Make sure to clarify the repayment schedule with your lender or broker to avoid any surprises along the way. 

Choose the Right Home Loan

Choosing the right home loan is essential when upgrading to a new build. There are three common types of loans to consider: 

• Variable Rate Loans: The interest rate fluctuates with market changes, which means your repayments can go up or down. A key benefit of variable loans is that you can make extra repayments without penalties. 

• Fixed-Rate Loans: Your interest rate is locked in for a set period, allowing for predictable repayments. However, if interest rates drop, you could end up paying more than you would on a variable loan. 

• Split Loans: These loans combine both fixed and variable rates, giving you the flexibility to decide how much of your loan is fixed and how much is variable. 

A mortgage broker can help you navigate these options and choose the one that suits your long-term goals and financial situation. 

Leverage Existing Equity

When purchasing a new house and land package, you might be able to use the equity from your existing property to help fund your upgrade. Equity is the difference between your property’s market value and what you owe on it. This is especially useful if you're looking to avoid saving for a new deposit from scratch. By using the equity in your current home, you can access a larger deposit for your new build. 

Speak with your lender or mortgage broker to explore how you can use your existing equity to assist with your new purchase. 

Understanding Stamp Duty and Other Fees

Stamp duty is a government tax that applies to most property purchases, but new builds offer a unique advantage. With a house and land package, you’ll only pay stamp duty on the land, not the house. This can result in significant savings, as the house portion of the purchase price is exempt from stamp duty. If you are a first home buyer, you may be eligible for additional incentives, read our blog about first home buyer finance here to find out more.

Your lender or solicitor can provide guidance on these costs to ensure you’re prepared. 

Ready to Upgrade to a New Build at Sage? 

Upgrading to a brand-new home at Sage means more than just a fresh start—it’s about embracing a balanced life in a vibrant community that offers plenty of room to grow. By carefully considering your finances, organising your deposits, and understanding your loan options, you can make the process of upgrading to a new build both smooth and stress-free. 

At Sage, we’re here to support you every step of the way. Ready to take the next step? Get in touch with our team to explore the new build options available in our thriving community at sage@cedarwoods.com.au