Turn key vs build

Building a home can be a good option these days for various reasons. That includes the potential to get additional HomeStart subsidies from the government for first-home buyers, and property investors only needing 20% deposit rather than the usual 30% for an existing home.

Generally there are two ways to build a home. Firstly, the most common is a progressive build (it has various other names) which has a separate contract for the land purchase, and a separate contract for the build. Sometimes this option is marketed as one price, making it attractive to first-home buyers, combining the section and cost to build (e.g. a $600k house and land package but the land is $200k and the build is 400k). Often people might buy the section first and then work on plans and a builder in due course.

The second is a “Turn Key” or buying-off-the-plans type package. This is an option the banks prefer to fund as it comes with less surprises being a set, fixed cost. Usually it requires 10% down payment, then nothing else is paid until the house is finished and the code of compliance is issued. The developer/builder funds the build until it’s finished, then usually requires payment within 10 days of completion.

Banks will usually issue an approval for up to 12 months, so there are time constraints. On the up side it does mean the buyers do not have to pay any mortgage payments on the land and build while still paying rent.

Building is a complex process so it pays to talk to a mortgage broker about the process and what bank might best suit your situation.

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