Whats the best way to go about building your first home?

Hi guys,

I am new to this website and was referred here by a friend that says he browses the forums here religiously, Hope someone can shed some light on my situation.

Me and my partner are looking into building our first home. We are looking at spending around $120k on a block of land somewhere between 450-550sqm around the Ballarat area. We have a found a home to build around the $195k with a lot of extra inclusions as well as included site costs.
As a young teenager I made some silly mistakes in terms of getting a personal loan for a car and going on a working visa maxing out my credit card overseas which has left me $18,000 of debt Which we have transferred onto a 24 month interest free credit card which we have direct deposits of $800 a month. (over the 24 month period paying back $19,200) Myself and my partner have started new full-time jobs both taking home roughly $62,000 a year saving roughly $3000 a fortnight for our home saver account.

We have already saved $12,000 since December 20th which is huge for us, (especially with my erratic spending) Should we wait until we save %20 for a deposit and pay off all of our debt first before getting the loan? Or would we still be okay to put down %10 plus the first home owners grant & keep paying off this personal loan over the 24 months with no interest?. My friend just bought a house (turn key) that was just finished and paid a total of $375k plus $20k in stamp duty,(4-2-2) I plan on getting ours done for $330k that's including stamp. the exact same builders and floor plans and in the same area. Is it really possible to make 40-60k in profit from building a home and selling it after a year? minus real estate costs?

Sorry for all the questions! Thankyou in advance!
If anyone has any tips or advice on how they saved for their first home it would be greatly appreciated.

 

before you think of buying a house and getting yourself into more debt...

pay off the credit card debt first!

 

As per CK's comment pay off the debt first. The more debt you have the less you'll be able to borrow.

I'd also get rid of the credit card. You're both on good incomes and you seem to've developed a good saving habit. If you keep saving and live within your means then there really should be no need for a credit card.

Good luck.

 

Do you plan to buy in new estate? i.e. the land might not title for a while? In a way this will give you time to save more deposit while locking the land in place.

As others above, I'd say pay off the debt first.

 

Long land titles are a great thing. Get the equity free kick on a deposit while still saving money. If it's a year away to title, and you would take a year to pay off your credit card debt, then why not lock in a price, pay off your credit card debt and finish up with some profit on a block of land you're going to build on.

 

@Scotty B - for the above just make sure you are disciplined with your saving / paying down debt and keep the saving going through the design and construction phase.

Land - make sure you understand site and soil classification codes as it affects cost of construction. Avoid significant slope, sites requiring significant retaining or problematic trees.

Build - Also make sure you aim for a fixed price build contract. Be wary of provisional sums in the contract.

Site classifications are below. Most builder pricing ( Sydney ) assumes M-class. The further down in this table, the more problematic and the greater the site costs.

 

Min deposit for h&l of that value in Vic is about $17k. More deposit means less lmi cost and more choice of lender.
I'd recommend doing the building contract simultaneous with the land. oart of getting a build contract means they gix the site costs and slab costs etc. many builder fix the cost for a period, so when the land eventually titles you aren't up for extra.

Valuations are getting tricky with h&l now in that valuers need to identify the block which means they won't do their report until the land is surveyed and pegged and the roads are in. Just before settlement.
It sounds like you have a good plan with the credit cards. I'd chat to a broker and get an idea of what your capacity is with and without the credit card.

I'd also consider established in Ballarat. There's some nice houses for under $320 closer to town where you don't have to wait and pay interest on the build.

 

I would not wait, I would speak to a broker and see if you can get the loans etc & keep paying down as you go.

 

Thankyou for all of your support guys! You have all had an impact on my decisions. I read a really good article on this link.

A Home Loan Deposit That’s Right For Australians | Mutilate The Mortgage

which has swayed my thinking quite a bit, I think now we are going in the other direction looking at being patient saving up the 20% to cut out LMI and putting down a heftier chunk of cash of the deposit. At the end of the day this will prove to ourselves that we can handle a decent sized loans, as we have gotten into pickles with smaller loans. We will continue to pay off the credit card over 18-24 months interest free, and possibly look for a house in that isn't titling for 6-10 months. Eventually after living in the property as our PPOR for 1 year looking to rent out & start looking into purchasing investment properties & attempt to make a go of getting a positive cash flow through Rental income. Any Thoughts? Thankyou all so much for your tips!

 

I think waiting and saving is a good decision. Make sure you read @Terry_w 's tips particularly around living in PPOR and then renting it out.. Also look up @euro73 's posts on NRAS and Dual occ, for your +ve cashflow investing journey. Best of luck.

 

Definitely pay off that credit card and save the 20%. LMI insures the bank, not you. I sure wouldn't want to pay thousands to insure a bloody bank.

 

And


First home owners in regional Victoria get a boost from state government

Do it now, pay lmi before builders and developers start capitalising on the increased grant

 

In light of the recent news, I'd consider jumping straight in as per @tobe 's advice. Builders will just start including the grant in their pricing before too long.

 

Where are you going to purchase the block of land? New estate or established area?
If your only going to live in the place for one year then you should be trying to buy a house on a big block in an established area of ballarat.
Maybe do some light rennovations and rent that out
Much more likely to get an equity gain than building a house and land package
Im naking the assumption you can still buy in a decent older area gor 350k

Cheers