How does a building loan work?
The application will be assessed on receipt of the necessary documentation in line with the policy and lending criteria of the bank. Assuming the bank is in a position to assist, the bank will require the customer to finance 10% of the total package price (land + contract amount) upfront, in all instances; this however could increase dependent on the credit profile score of the applicant(s). The 10% requirement is based on the bank’s assessment of the completed value of the property. If the customer is granted a loan amount with a shortfall (a loan amount of less than the contract price), the customer will be required to complete building to the value of the shortfall amount upfront from his/her pocket. Additionally, the bank will require the builder to build a further 10% of the contract price from his/her funds before any funds will be paid out from the Home Loan account. The final quote will have a condition stipulating this requirement and the customer will be advised of the requirement when final customer contact is made.
You have 12 months to complete the building. Construction work must commence within the first 3 months following registration.
Your loan term is limited to 240 months.
Do I need to provide a deposit?
The bank will require the customer to finance 10% of the total package price (land + contract amount) upfront, in all instances; this however could increase dependent on the credit profile score of the applicant(s). The 10% requirement is based on the bank’s assessment of the completed value of the property. If the customer is granted a loan amount with a shortfall (a loan amount of less than the contract price), the customer will be required to complete building to the value of the shortfall amount upfront from his/her pocket. Additionally, the bank will require the builder to build a further 10% of the contract price from his/her funds before any funds will be paid out from the Home Loan account. The final quote will have a condition stipulating this requirement and the customer will be advised of the requirement when final customer contact is made.
Will I be required to make repayments to the building loan during the building process?
Yes. You will be required to make repayments towards the capital amount as well as the interest during the building period.
Variable interest
You will be limited to the variable interest rate until the building has been completed. On completion of the building, you may apply for a fixed rate.
Progress payments
You can apply for progress payments at any stage during the construction process provided that sufficient work has been completed and the bank is satisfied with the progress. A maximum of six progress payments will be allowed, based on the work completed.
Progress payments are calculated on the contract amount as the loan amount financed to the customer may not be equal to the total amount required to construct the dwelling.
As progress draws are limited to six payouts, the process must be managed between the builder and the customer.
Insurance
The builder has to provide Builder’s All Risk Insurance over the property until completion; thereafter in terms of your Mortgage Loan Agreement, you will need to provide the bank with suitable home owner’s comprehensive insurance that complies with the bank’s criteria.
Contact Us
FNB Home Loans
087 730 11 44
National Credit Regulator
www.ncr.org.za
0860 62 76 27
Ombudsman for Banking Services
www.obssa.co.za
0860 800 900