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 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 later 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. However, smaller builders can also offer competitive pricing, flexibility, and a more personalised approach.
Understanding Build Contracts
Once you’ve secured land and a design, the next step is to review your build contract and organise 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 changes upfront where possible. Many contracts include prime cost (PC) sums, which are estimates for components like groundworks, kitchens, and electrical fittings. Ensure these allowances are realistic to avoid unexpected costs later.
Turn-Key vs. Progress Payment Builds
There are two common ways to structure a residential build in New Zealand:
1. Turn-Key Solution
With a turn-key package, you pay a deposit and the balance only once the house is completed and ready for you to move in. This option provides financial convenience but can sometimes come with a higher overall price since the builder covers the funding during construction.
2. Progress Payments
This is the most common method, where you purchase the land upfront and pay the builder in stages as construction progresses. Since you’re funding the build, there are usually fewer finance charges included in the price, and it may offer more flexibility for making changes along the way.
Understanding Mortgage Approval for a New Build
Securing the right mortgage approval is another key part of the process. Generally, you will need a minimum 20% deposit for the land purchase. For example, if the land costs $350,000 and the build cost is $350,000, you would typically require around $70,000 upfront—effectively 20% of the land price but only 10% of the total project. Since this type of lending is exempt from the Reserve Bank of New Zealand’s standard loan-to-value restrictions, some lenders allow as little as a 10% deposit on the overall project, making new builds more accessible to first home buyers.
There are also specialist products designed to support new builds. ANZ offers its Blueprint to Build package, which provides a 1.25% per annum discount on floating rates or a 0.6% discount on fixed rates, plus a $5,000 cashback to help with upfront costs. Additionally, Kāinga Ora’s First Home Loan Scheme is available to eligible buyers, providing another pathway to homeownership with reduced deposit requirements.
Getting the Right Construction Finance
Financing a new build is different from arranging a standard mortgage. Not all bank staff or mortgage brokers are experienced in construction lending, which can lead to higher costs or less suitable loan structures.
At Mortgage Sense, we work with multiple banks and non-bank lenders to ensure your finance package fits your situation. Whether you’re looking for NZ home loan advice or guidance from a mortgage broker in New Zealand, our team can help make your building journey smoother.
Ready to Build Your Dream Home?
With the right advice and a clear plan, building your new home can be a rewarding experience. Contact our team today to explore your finance options and take the first step toward turning your vision into reality.
