#3 – The bank won’t lend you money once your property is built
New Builds can take a while to get built. It usually takes 6-18 months, give or take.
And during construction, things can change, making it harder for you to get money from the bank to pay for your property.
Some of these come from the bank:
- They increase the interest rate they use to test your mortgage
- They change how they assess your expenses (CCCFA 🙄)
- They change their lending criteria (e.g. introduce a Debt to income ratio)
Other times, your circumstances could change. And this could also stop you from getting the money. Things like:
- Your salary’s gone down
- You’ve welcomed a new baby into the family
- You’ve taken on new debt (e.g. bought a car on finance)
- You become self-employed
But here’s the thing, when you sign a contract to buy a property, you legally need to pay for (settle) the property once it’s built.
So, you often can't substantially change your financial situation for the worse while your property is being built.
This doesn’t mean you have to put your family or career plans aside, but you have less wiggle room if your lending is tight.
How do I fix this?
Sometimes these changes aren’t within your control, e.g. if you’re made redundant.
But, sometimes, investors take out massive new loans or voluntarily take a lower-paying job during construction.
If the bank is willing to lend you loads of money, doing these things might not be so bad.
But if your ability to borrow is limited, taking on new debt and expenses is often not a good idea.
That is why you should also consider the following:
- Get a mortgage approval as soon as possible (some investors now get 24-month pre-approvals).
- Speak openly with your mortgage adviser before taking on new debt (or if you plan to start a family).