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7. 'Building Bonds' and 'Future Use' mortgages

Building Bonds and Future Choice mortgages are progressive home loan solutions that enable qualifying clients to register a mortgage higher than the current value of the property, creating a surplus that can be accessed at a later stage.
A Building Bond is used to finance the construction of a dwelling on vacant land or additions and improvements to an existing dwelling. Usually full funding of the vacant land is available up front, thereafter progressive payments are structured to fund each stage of the building process (max. 6 progressive payments).
In the case of Future Use mortgages the surplus funds can only be accessed if the value of the property has increased, unless the funds are being used for home improvements.

Important Factors

• Cater to a clients specific building or future changing needs
• Time and cost saving on single bond registration that covers future requirements
• Some lenders defer repayment instalments until building is completed
• Other lenders offer interest only repayments whilst building is in progress
• Monthly instalments are based on total funds paid out not total registered value

Tips for the client

• Before applying for a building loan ensure that you have building plans (preferably council approved) and a building quote from an NHBRC approved builder.
• If repayment is deferred until building is completed, interest on progress payments is debited to the loan account which will effect the final progress payment. To eliminate a possible shortfall on the final progress payment it is recommended that the client makes additional repayments into the loan account whilst building progresses.

Read about a capital and repayment mortgage

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