Whether detached homes in greenfield subdivisions on the edge of town, or medium-density houses bunched on urban sections, new houses are popular choices for home buyers.
However, if you’re financing a new build, you need a different type of loan, called a construction loan. So,which banks have the best deals and what are their rates? Canstar explores:
Lowest Construction Loan Interest Rate Deals. In this story we cover:
What is a construction loan?
A construction loan is structured differently from a typical fixed-rate owner-occupier mortgage. Unlike a typical mortgage, which is paid in one lump sum, a construction loan is drawn down progressively. This means that you increase your borrowing in stages, as you pay for the progress of your new build.
For example, as each stage of your home is completed, the builder will invoice you for the work done. You then submit that invoice to your lender for payment.
The amount available to borrow is based partly on the estimated value of the property upon its completion. And a construction loan usual has a variable interest rate, until the last payment on the house is made, when you renegotiate with your lender to switch to a standard mortgage.
And it’s the variable rate that can be the kicker. For variable interest rates are usually higher than fixed rates. At the time of writing, the average floating rate on Canstar’s database is 8.59%, while the average one-year fixed rate is 7%.
Currently, two lenders are offering discounted construction loan rates, in addition to cashbacks and other enticements. Below is a breakdown of what’s on offer:
ANZ: Blueprint to Build
ANZ’s Blueprint to Build offers discounted home loan interest rates and savings on fees:
- Flexible/floating rate discount of 1.25% p.a.
- Fixed rate: 0.60% p.a. discount (applied to new fixed-rate periods only)
- Fee savings on ANZ’s Freedom accounts, personal credit cards and Flexible Home Loans
- Duration of deal rate: two years from initial draw-down
- For new residential housing, rental properties and home and land packages
- Available for homes built under government’s KiwiBuild program
- Up to $5000 cashback for eligible borrowers
→ Related article: What are Low Equity Premiums?
SBS: FirstHome Combo
If you’re building a first home, the SBS’s FirstHome Combo offers:
- Residential floating rate discount of 2.55%
- $2000 cash to help cover the costs connected to purchasing your first home
- $1000 to help cover your first year’s home and contents insurance premiums on policies with SBS Insurance
- $1000 top-up for Lifestages KiwiSaver Scheme account(s)
- 12 months of free broadband with Pulse Broadband
Westpac
As with SBS’s first home buyer (FHB) deal, Westpac is offering a cashback of $3000+ for FHBs who take out a new Westpac home loan of $250,000 or more. This includes those who plan to build a new first home.
How can I compare home loans on the market?
One of the easiest ways to reduce the cost of building or buying a home is to ensure that you secure the lowest mortgage rate. And this is something Canstar can help you with, thanks to our free and easy-to-use comparison tools.
The table below displays some of the 2-year fixed-rate home loans on our database (some may have links to lenders’ websites) that are available for home owners looking to refinance. This table is sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Products shown are principal and interest home loans available for a loan amount of $500K in Auckland. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products. Canstar may earn a fee for referrals.
About the author of this page
This report was written by Canstar’s Editor, Bruce Pitchers. Bruce began his career writing about pop culture, and spent a decade in sports journalism. More recently, he’s applied his editing and writing skills to the world of finance and property. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.
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