Thinking of Building Your Own Home in New Zealand?

Building your own home is a dream for many Kiwi families. Designing a property that perfectly fits your lifestyle, needs, and future plans can be exciting but knowing where to start is often the hardest part.

From finding the right section to securing finance with competitive home loan interest rates, there are a few key steps to ensure the process runs smoothly and your home is completed on time.

Finding Sections to Build On

One of the biggest challenges, particularly in popular areas such as Auckland, is finding land. Many sections are snapped up by larger building companies and offered as house-and-land packages, but there are still opportunities to buy bare land if you prefer to work with your own builder.

When selecting a building company, do your research. Look beyond social media horror stories – seek reviews from trusted sources and speak to previous clients to ensure you’re choosing a builder who delivers on both quality and communication.

Designing the Right Home for Your Budget

Most people start with a vision of their ideal home, but it’s important to balance your wish list with your budget. Consider what features are essential and what can be added later. Investing in structural elements and design features that are hard to change will often save money in the long run.

Larger building companies often provide pre-designed house plans with detailed specifications, which can help you understand what’s possible within your price range. Smaller builders, on the other hand, can offer flexibility and a more personalised approach, which may suit those wanting custom designs.

Understanding Build Contracts

Once you’ve secured land and a design, the next step is to review your build contract and arrange finance. Most banks and non-bank lenders require a fixed-price contract, as this provides certainty around costs and usually includes a completion guarantee.

A fixed-price contract outlines all materials and products to be used, so review it carefully and make any changes upfront. Many contracts include prime cost (PC) sums – estimates for things like kitchens, foundations, or electrical work. Ensure these allowances are realistic to avoid costly surprises later.

Tips for a Stronger Build Contract:

Ask for a few free-of-cost variations. Usually your contract will include only a couple of variations which can be done free of cost, but you can always negotiate to get this increased before signing the build agreement.
Include a start and finish date. This protects you from extended delays, especially in land-and-build packages.
Add a sunset clause (for turn-key builds). This sets a firm completion deadline, ensuring the builder can’t delay the project indefinitely or increase the price before settlement.

These small inclusions can save significant time, money, and stress during construction.

Turn-Key vs. Progress Payment Builds

There are two common ways to structure a residential build in New Zealand:

1. Turn-Key Solution
You pay a deposit upfront and the remaining balance only once the home is completed and ready to move in. This offers convenience, as you don’t make payments during the build, but it may come at a higher overall cost since the builder funds the project.

Turn-key builds are also eligible under Kāinga Ora’s First Home Loan scheme, which helps first-home buyers get in with a lower deposit.

2. Progress Payments
This option is where you purchase the land first and then pay your builder in stages as construction progresses. These loans are usually interest-only during the build, giving you flexibility and control, and can work out cheaper overall.

Understanding Mortgage Approval for a New Build

Most lenders will require a minimum 20% deposit for the land portion of your purchase. For instance, if your land costs $350,000 and the build costs $350,000, you might need around $70,000 upfront – effectively 20% of the land price but only 10% of the total project.

Since new build lending is often exempt from the Reserve Bank’s standard loan-to-value restrictions, some banks allow as little as a 10% deposit on the total project, making new builds more accessible to first-home buyers.

Construction Loan Offers You Should Know About

A number of lenders are currently providing special offers for new build finance:

ANZ’s Blueprint to Build: 1.25% discount on floating rates or 0.6% discount on fixed rates, plus a $5,000 cashback towards upfront costs.
ASB Construction Loan Discount: 1.25% discount on floating rates for new build loans.
SBS’s First Home Combo: Special 2.55% interest rate for construction lending as part of its First Home Combo package.

These offers can make a major difference to your total build cost and interest paid during construction.

Buying Land and Managing Your Own Build

Some people prefer to buy land and manage their own project, hiring trades individually rather than going through a main contractor.

While this can offer more control and potential cost savings, it’s also far more complex, but things can go off the course very quickly, since if you were to do this straight up with a builder, you would get a master build finish guarantee, which essentially means you are insured in case things go off the track, but if you are managing the project on your own, you do not get this facility and sometimes can end up costing more to you, which is why banks are often hesitant to lend on self-managed builds without a fixed-price contract or a detailed project plan. However, this doesn’t mean it’s impossible.

If you’re planning to project-manage your own build, it’s essential to prepare:

A comprehensive budget with quotes from qualified trades.
A timeline and build schedule showing key milestones.
Evidence that all key contractors (builder, electrician, plumber, etc.) are licensed and insured.

At Mortgage Sense, we can help you structure your application so that banks see it as well-planned and low-risk improving your chances of approval even for non-traditional or self-managed builds.

Getting the Right Construction Finance

Financing a new build is different from arranging a standard mortgage. Not all lenders or advisers are experienced in construction lending, and the wrong structure can lead to higher costs or cash-flow issues.

At Mortgage Sense, we work with multiple banks and non-bank lenders to find the most suitable finance solution for your project. Whether you’re building your first home, developing an investment property, or exploring turn-key or progress payment options, we’ll guide you every step of the way from concept to completion.