Let us help you build your dream home

Transcription

1 Let us help you build your dream home We ve made it easier for you to build a new home or make improvements to your existing one. First National Bank - a division of FirstRand Bank Limited. An Authorised Financial Services and Credit Provider (NCRCP20).

2 Building Loan Process Interim interest is payable Registration of your Building Loan and payout ONLY for the land portion Building construction process can begin Funds released in a series of progress payments

3 Progress Payments As work on your building progresses, your builder will require progress payment/reimbursement for completed construction work. The bank will make these payments based on the estimated cost of building work completed, the estimated cost to complete the project and after receiving a duly completed and signed progress payment request form from you. Payment will not be allowed for materials on site or upfront to purchase any materials. Progress payments help ensure that there are sufficient funds retained to complete the building. The bank s appointed valuers will assess the value of the work completed. The bank will calculate the amount of money that must be retained to complete the contract with each progress payment request. There are usually up to six free progress payments which are permitted before your house is complete. Additional progress payments will attract an inspection/operational fee.it will be a specific condition that prior to initial progress payments, the bank would require a copy of the Municipal approved building plan of the dwelling you are building. Each progress payment request is to be made in writing and the applicable forms can be obtained from the Contact Centre, on All progress payment requests must be properly signed and dated by you (the customer only or jointly if the account is held by joint parties) and the principle building contractor. Never pre-sign a blank progress form and hand it to the builder. Payments will only be made directly to the builder s account or the customer s account, provided the correct account details are recorded on the progress payment request form. No payments will be allowed to any third parties as this could result in unauthorised amounts being applied for. What happens when there is a shortfall? Any difference between the loan amount and the tender will have to be paid by you from your own funds upfront towards construction progress or the purchase of the land, before the bank will allow any advances from the loan amount. You will be required to pay the funds into the registering attorney s trust account within 60 days of date of instruction, prior to registration. Upon registration, the attorneys will pay the funds into your bond account, where the funds can be accessed via normal Progress payments What are the procedures for final progress payment? On completion of the contract, when the builder requests final progress payment, inspect the house to ensure it has been completed to your satisfaction as per the plans and specifications per your contract. You will be requested by the bank to sign a letter of satisfaction, advising us that you are satisfied with the completed house. In addition, a signed copy of the certificate of occupancy, which is obtainable from the Local Authority - and any other documents requested in the Mortgage Loan Agreement - must be forwarded to us before a final progress payment can be processed. You can fax your progress payment forms to or your request to [email protected].

4 Building Loan Policy Your responsibilities: Once funds are paid from your Building Loan, you are required to make regular monthly repayments based on the interim interest charged on these amounts for the period of the building process. Capital and interest repayments only become payable upon completion of the building or if the building term exceeds 12 months, capital and interest become payable on the 12 month build period expiry (Unless the customer has obtained approval from the bank to extend the building period). If for any reason there is a delay in the completion of the building, it is your responsibility to contact the bank as soon as you are aware of this. Inform the builder and the bank of any problems, concerns or delays in the building process. The bank will not act as clerk of works on your behalf and in need, you may want to appoint a suitable qualified professional person to supervise or oversee the project. It is important to note that you have appointed the builder and all disputes are to be discussed directly with the builder and the NHBRC where deemed necessary. Ensure that the contract you sign with the builder does not comprise of conditions which will be prejudicial to you. In need, consult with a legal advisor or a suitably qualified professional to assist youbefore signing the contract. Request progress payments only if you are satisfied with the progress and the amount requested by the builder. Service your interim interest by making regular monthly repayments for these amounts as this will avoid any shortfall that may occur. Ensure that you and your builder understand all the bank s conditions of loan and that all the conditions are being complied with at the times required/stipulated by the bank. Ensure that on completion of the building that your Home Owners Comprehensive Insurance Cover is in place. The Contractor s All Risk Insurance Cover only provides cover from the date when construction commences until date of completion/occupation. The requirements of the builder: The bank must be notified of any deviation from the tender, plan, change in builder selected and specifications submitted initially as this could affect the loan amount approved and ultimately the assessed market value of the property. The builder must be registered with the NHBRC. The builder must build according to the approved plans and specifications and conform to the requirements of The National Building Regulations at all times. The builder must enrol the property being built with the NHBRC, prior to construction. The bank will require the Builder to sign a waiver of lien. The bank would require proof of a Contractor s All Risk Insurance Cover for the duration of the building process until completion. The builder must comply with the bank s conditions as and when required and ensure that the project is completed within 12 months from date of registration.

5 Costs associated with building When you decide to build your dream home, it is important to bear in mind the additional costs involved for the building process. These fees are over and above the normal home loan fees. Purchase Price Deposit (if necessary) This is a payment made to secure the land. The amount will be stated in the Offer to Purchase contract. Amount varies according to property value. Shortfall Amount (if applicable) The amount of money the customer must have upfront to finance building. Refer to Mortgage Loan Agreement. Architect Their fee to design, draw and submit their plans to the local council for approval. Architect fees will vary according to the company chosen and design plans. Additional Progress Payments (<6 payments) A fee charged to have a valuer to evaluate and authorise progress payments. Refer to annual pricing guide for fee. Builder or Contractor The builder will provide you with a contract price which will include building costs, materials etc. This will also vary according to the design, structure and finishes used. NHBRC Enrolment Fee This fee is paid by the builder to register the new home being built with the NHBRC, which is usually included in his contract price. This fee will vary according to the contract price and ranges between R6 500 and R Industry Professionals These professionals may include the use of a quantity surveyor, structural engineer etc. Again, depending on the professional chosen, their fees will vary. An additional 1% premium rate (or rate applicable at the time) will be charged for the duration of the building process, and will revert to the rate quoted in your Mortgage Loan Agreement. On completion after the final draw, the building loan is converted to a traditional home loan.

6 Scenarios Your application will be assessed on receipt of the necessary documentation in line with the lending criteria of FNB Home Loans. Assuming the bank is in a position to assist, a minimum deposit of 10% of the Total Package Price (land + contract amount) is required in all instances; this however could increase depending on the credit profile score of the applicant(s). The deposit will be based on the lower of the Total Package Price, or the FNB assessed market value on completion. Scenario 1 Scenario 2 Purchase of Land R Purchase of Land R Contract price R Contract price R Total Package Price Total Package Price FNB Assessed Value R FNB Assessed Value R % R % R Available amount for progress payments R Available amount for progress payments R % Redeemable on completion will depend on the applicant(s)credit profile score e.g. 95% Actual loan will be R R % Redeemable on completion will depend on the applicant(s)credit profile score e.g. 95% Actual loan will be R R Note: If the applicant credit profile score is 90% or below, no amount is redeemable. If for any reason during the period of construction, the applicant(s) credit profile deteriorates, the bank reserves the right to retain the redeemable amount. An additional 1% premium rate (or rate applicable at the time) will be charged for the duration of the building process, and will revert to the rate quoted in your Mortgage Loan Agreement. On completion after the final draw, the building loan is converted to a traditional home loan.

7 Documentation / Forms required On Date of Application A written quotation/tender from the builder for the construction work to be undertaken. Proof of registration of the Builder with the NHBRC. A schedule of finishes specifying the materials and finishes which will be used in construction. A building plan of the buildings and improvements to be erected. NOTE: Local Authority Approved Plans are not a necessity at this stage. Prior to Registration of the Bond FNB Tender and Building Specifications- Minimum Requirements FNB Waiver of Builders Lien. Proof of Contractor s All Risk Insurance Cover. Prior to any Progress Payments from the Loan A copy of the Approved Local Authority building plan. NHBRC Unit Enrolment Certificate. Any other additional documents required by the valuer. Prior to Final Progress Payment An Occupancy Certificate from the Local Authority. An Electrical Wiring Compliance Certificate from the Builder. Any other condition as stipulated by the valuation department, i.e. engineers certificates etc.

8 Glossary Home Owners Comprehensive Insurance Cover This policy provides cover for certain losses or damages to the property. These are specified in the policy document. Interim Interest Once funds are paid out of the home loan account, interest is calculated on a daily basis on the outstanding balance. The interest is debited to the home loan account at the selected billing date. (The longer it takes to complete the building, the less money is available in the account) NHBRC The National Home Builders Registration Council ensures that builders extend their commitment to customers by providing a five year structural warranty against any structural defects that have manifested from the date of occupation. For any further information on the NHBRC their website can be visited. Owner builder Not in the business of home building, Building a home for his own occupation and Not using an NHBRC registered home builder to assist in the building of that home. Total Package Price This is the total amount which consists of the land amount plus building contract amount. Waiver of Lien This is a legal document where a contractor waives his common law right to hold control over a property if he is not paid in full. Premium Rate An additional 1% premium rate (or rate applicable at the time) will be charged for the duration of the building process, and will revert to the rate quoted in your Mortgage Loan Agreement. On completion after the final draw, the building loan is converted to a traditional home loan.