Step by step guide to?home building?or renovation: Part 2.
In part 1, buying residential land to build, land factors and regulations and variables were discussed. We will now go into depth with regards to financing, banks, the National Credit Act, bond calculators and the Consumer Protection Act.
The Bond originator
Getting the best deal on your home loan is easy if you ask the experts.
In this market, it is critical that you use the services of an expert originator who knows how to position your bond for optimal success.
Make sure you use a bond originator that achieves high approvals in the market with the least delays.
20 reasons why homebuyers should use a bond originator
Secure approvals: better chance of approval by submitting to multiple lenders (ABSA, FNB, Investec Private Bank, Thala Bank, Nedbank, RMB Private Bank and Standard Bank)
Get the system to work for you: take advantage of the fact that each bank has different credit criteria, deposit requirements, documentation requirements, interest rates and turn-around times
Expert positioning: prepare, motivate and package the application for the best chance of approval
Best interest rates: banks compete for every loan application ensuring you get the best deal
Simultaneous submission: direct interface to lenders systems allowing simultaneous submission of applications to multiple lenders
No cost: it’s a free service to the homebuyer
No obligation: no obligation to accept any loan sourced
Expertise: home finance experts have intimate knowledge of the various banks’ products, credit criteria, documentation requirements and interest rates
Problem escalation: dedicated senior personnel escalate any problem applications ensuring a better chance of approval
Hassle free: one generic application form for all lenders
Cost savings: advice on the best way to structure the loan to reduce the total cost
Convenient: originator completes the application form and does all the legwork
Faster approvals: dedicated personnel guide the application quickly through the bank’s approval process, actively chasing up progress
Independent advice: most appropriate home loan options from all lenders
Dedicated communication: one point of regular feedback on the application status for all lenders
Best service: professional and personalised service either face-to-face, telephonic or online
User-friendly website: offering useful information, affordability calculators and home loan tools
Prequalification: certainty on the ability to afford the property
Commitment: home finance experts are committed to securing your loan
Homebuyers all agree: over 70% of all new home loans are secured using mortgage originators
Get the Ooba advantage
To get pre-qualified or apply for a home loan contact name surname on 0860 00 66 22, or go to Ooba.
The BUILDING LOAN process is different from BANK to BANK, in some instances, dramatically so.
Take special cognisance of requirements if you have a Single Credit Facility and are building a home – use the protection offered by a Building Loan and rather convert the facility to a Building Loan for the duration of the construction period.
Please ensure that you, as the home owner, understand the process you will be subjected to by your Bank.
Once your building loan has been approved, the Bank will proceed with all documents necessary to give effect to the transfer and registration of the property.
After transfer, plan approval and enrolment of the property with the NHBRC has occurred, the building construction process should begin.
Summary of the Building Loan Process
Transfer of Land – Municipal Approved Plans – Enrolment of property with the NHBRC – NHBRC fees are paid by yourself or the builder – make you are aware of the prescribed fee, there have been instances where builders overcharge - a Certificate of the enrolment is issued by the NHBRC, which is then forwarded to the Bank in order for them to prepare your Building Loan for Progress Payments – The Builder will have to provide the Bank with Builder’s All Risk Insurance over the property until completion and signed Waiver of Builder’s Lien - Progress Payments will be effected to the builder upon the Bank Valuator’s inspection, based on a work to complete basis – no payment will be made for materials on site – The Occupation Certificate is issued by Council and is the Home Owners responsibility – Final Payment to the builder will be made on completion of the contract according to plans, specifications and once the Snag List has been attended to and you are satisfied with the completed house.
Who is responsible for appointing a builder and sign the contracts?
By signing a building contract, the home owner officially appoints the builder.
What is the relationship between the builder, the customer and the Bank?
The primary contractual relationship vests between the homeowner and the builder.
The only contractual obligation that the Bank has, is with the customer for the building/mortgage loan. The Bank has no contractual obligation with the builder, therefore ensure you are aware of your responsibilities; ask your Bank for assistance if you are unsure.
The Bank’s only relationship is with the customer and the Bank will only act on instruction of the customer.
Can the Bank recommend builders?
The Bank cannot recommend any builders to any homeowner. Legislation stipulates that all builders that build houses must be registered with The National Home Builders Registration Council (NHBRC) which is therefore your first point of call. In addition using a builder that belongs to a voluntary association such as Master Builders SA will ensure less difficulties during the building process.
You can check the NHBRC to confirm that the builder is registered, then search builder or by calling the toll free number?0800200824.
What are my rights and obligations in terms of the building contract?
It is always recommended that you obtain a legal opinion in respect of a building contract to ensure that it is fair to both parties and to obtain clarity.
What is a 'waiver of Builder’s lien'?
This is a legal document where the builder waives his common law right to hold control and possession over the property or resists to hand over the keys to the Bank when requested to do so, if he is not paid in full.
What is the reason for waiver of builder's lien?
A waiver of builder's lien is signed by the builder to ensure that in the event of the builder absconding the site, that he has renounced, waived and abandoned all his rights, title and interest in and to any lien or right of retention which he may have in regard to certain building and/or structures and/or improvements/materials on site in favour of the Bank, for your protection. All Banks will insist on a signed Waiver of Builder’s Lien.
Does the Bank insure the property during the building process?
The Builder has to provide Builder's All Risk Insurance over the property until completion. Ensure that this policy is extended with any delays. Once the Occupation Certificate is issued by Council and thereafter in terms of your Building/Mortgage Loan Agreement, you will need to provide the Bank with suitable home owner's comprehensive insurance.
Why does the Bank not protect Homeowners from the builder?
The primary contract is concluded between the homeowner and the builder, therefore the Bank is not a party to this contract, the only contractual obligation that the Bank has is with the homeowner is in terms of the Building/Mortgage Loan Agreement.
Be aware of payment clauses, the specifications you signed for as well as time and penalty clauses.
Always be aware of the content of the building contract that you sign and what you are agreeing to.
What is a Progress Payment?
A Bank’ valuator will conduct an inspection of the property when the Bank receives a request for a Progress Payment. This means that funds in terms of the building contract will be released over the contract period a cost-to-complete basis, to ensure that sufficient funds remain in the loan to complete the project.
Progress payments do not cover material on site.
What is Interim Interest?
You will be required to pay the monthly interim interest, which is charged on the outstanding balance. Once the final progress payment is processed you will be required to make interest and capital contributions.
What do I do if I am not satisfied with the quality of the work done - Bank?
As a party to a binding contract, you have a right to engage with the builder directly.
Your first port of call should always be direct engagement with the builder as he needs to respond to your concerns and be given the opportunity to address them and ultimately rectify the situation.
If no resolution is reached, you may, as a last resort, instruct the Bank to make no further payment on the building until your concerns have been addressed to your satisfaction.
What Should a Home Owner Do When There Is a Problem with a Builder’s Work - NHBRC?
The homeowner should contact the home builder within three to seven days after which period, you can approach the NHBRC if the home builder fails to attend to the problem.
Can the Bank intervene in Builder Homeowner disputes?
The Bank is not a party to the building contract signed between the homeowner and the builder; therefore disputes must be resolved between the parties to the contract.
The only step the Bank can take is to not make payments on the homeowner’s instruction.
Be aware of clauses in building contracts that govern legal arbitration and disputes.
The NHBRC gives the customer protection in cases of disputes and can be referred there.
Also, any dispute will delay your project.
What Purpose Does The NHBRC Serve?
The NHBRC protects the interests of housing consumers (home owners) and regulates the home building industry. All homebuilders must register with the NHBRC and all homes must be enrolled 15 days prior to the commencement of building.
What Is Covered By The NHBRC Warranty Scheme?
The warranty scheme protects the housing consumer by providing a five-year warranty against major structural defects on the new home, 90 days defects liability warranty cover and 12 months roof warranty cover.
A housing consumer (home owner) will have the assurance that a homebuilder registered with the NHBRC has agreed to abide by the rules and regulations laid down by the NHBRC.
This means that the homebuilder has agreed to build the enrolled house to a minimum quality standard that has been set out in the NHBRC's Home Building Manual.
All building contracts must have a completion date.
The final Progress Payment
Final Payment to the builder will be made on completion of the contract according to plans, specifications and once the Snag List has been attended to and you are satisfied with the completed house.
When is a Building Loan shortfall likely to occur?
A shortfall may occur in the following instances:
When the builder hasn’t quantified the contract price realistically
When the estimated construction cost of what it will take to complete the building is higher than the contract price quoted by the builder
When the loan applied for by the homeowner is less than the contract price
When the building project extends beyond practical completion
National Credit Act – (CPA)
Visit NCA and know your rights, they also offer tips and help.
A Bond Calculator is on available on Ooba.
Consumer Protection Act
Consumer Protection Act and Property Transactions came in on the 21st April 2011.
The new Consumer Protection Act has important ramifications for property transactions, but to put in a nutshell, property sellers, buyers and estate agents should be aware of the following:
Sellers: now have to ensure that the property being sold is inspected and evaluated by an accredited service provider, resulting in a full and objective description of the condition of the property.
This information should be made available to potential buyers in order to ensure full disclosure of the condition of the property.
A buyer has to agree to buy the property as is or, alternatively, has to request the seller to make the necessary repair work before signing off the deed of sale.
Inspection and repairs, e.g. of plumbing and/or electrical faults and beatle damage, can be time-consuming and expensive.
Buyers: must be aware that they may obtain comprehensive due diligence information on the property on which they are about to spend a lot of money.
Now have the right to information that will help them make informed decisions, but they have as much responsibility to request the desired documentation from the seller as the seller has to obtain and present the documentation to them.
On presentation of all information, the buyer may decide to: buy the property as is, adjust the selling price, or request the seller to make the necessary repairs.
Estate Agents: will be able to source the necessary documents and certificates much easier and, in doing so; provide buyers and sellers with the assurance that a property meets compliance requirements.
As all terms have to be explained to the buyer in simple language, sale agreements need to be drafted in simple and understandable language.
In many cases the term “voetstoots” will no longer be applicable.
The Banking Ombudsman
Is there here to help any?bank?customer who has a complaint against his or her?bank may approach the?Ombudsman?for?Banking?Services (OBS) for assistance.
Written by Michele Hawrylkiwicz from?Buildzest.