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August 28, 2006
Getting the Final Building Quote
We went to see the Fairmont Homes salesman today. He gave us a final quote based on our selections and talked us through the whole process.
Firstly, we put the list of house requirements to him which he dutifully entered into his computer to produce a quote. He must have used an existing quote and modified it because there were a few things included that we didn't really want. The final price came out to $118,156. This was around $2000 less than we were expecting and still included roof insulation ($1200) and a full range hood for the oven ($350). So really the quote was around $3500 less than we were expecting. The main reason for this is that he ended up giving us the spa in the main bathroom for free ($1500 value) and then gave us another $1500 off because he said we were low effort customers. I think we're going to end up keeping the roof insulation but we're definitely going to drop the range hood, this gives a final price of $117,806. This doesn't include any upgrades to tapware or tiling in the bathrooms that we want, so I'd expect this figure to move up a little still.
One other inclusion I should mention is that they are throwing in a 6 outlet evaporative airconditioning system. Pretty good deal really, I figure this has around a $3200-$3400 value and saves us time getting three quotes and so on after the house is built. This means the only jobs we are likely to have inside the house now are:
The salesman threw a spanner into the works with regard to the floor covering to the living area. We had been planning to install floating laminate timber floors in the house with me doing the installation, saving about $1500. However this was on the proviso we could install the boards with the edges under the skirting boards. The usual method is to use 'quad', a quarter round wooden section to line the edges of the flooring. This looks ugly and we were hoping the builder would allow us to lay the flooring and them to attach the skirting afterward. Unfortunately it doesnt look like this will be possible.
A brief discussion of time lines was had. It looks like the concrete foundations will go down 2-3 months after signing the building contract. The majority of this time is taken up by local government development approval (which takes 4-8 weeks) and local governement building approval (which takes around 2 weeks). With a building time of 6-7 months it looks like 11 months is the shortest time to completion we can hope for. I'm expecting 13-14 months. The only positive to come out of this long delay before building is that the first installment of the building loan will not be required for at least four months. This leaves us paying interest only on the additional $140,000 we borrowed to pay for the land during these four months. Quite manageable.
One interesting point that came up was that the salesman had actually looked at the block of land we bought a few months before, interested in buying it himself. Apparently the vendor had wanted $170,000 for it, we paid $136,000. Clearly the vendor had toned down his expectations a little!
The only outcome of the meeting was to set a time for next week to go and sign the building contract and pay the initial (unrefundable) $1560 deposit.
Posted by mnemtsas at 09:44 AM | Comments (0)
August 24, 2006
Applying for the Loan
Spent a couple of hours filling out home loan application forms. There are some complexities that tripped me up here. I was counting on using some of our business income to get the loans but because we've been in operation only about a year the banks won't accept it. This means the loan will all be done on my wage, which means the title of the new house/land will have to be in mine and my wifes name. Originally we had intended that the titles would be in her name alone as she earns less money and there would be tax benefits. The upshot of this is that we may end up paying an extra 5-10% tax on any profit we make, as half the profit will be taxed at my marginal rate, which is 50.7%. Ouch.
Posted by mnemtsas at 04:13 PM | Comments (0)
August 23, 2006
Contract Cooled Off
The contract on the land cooled off today. We're committed to the whole venture now. The contact was subject to finance but we only need to borrow about $70,000 so there shouldn't be a problem with this.
Finance is likely to be a little complicated and the arrangement I've decided on is not the most tax effective, but is much more likely to be approved by the banks. Basically we're going to refinance our existing house to access some of the equity in that, and go to another bank for a combination land/building loan. The reason for this is that our existing lender charges a higher rate for building loans. The likely loan structure is:
Existing Lender: Refinance existing house for an extra $65,000.
New Lender: Take out land loan for balance of land cost (likely to be around $76,000). Get pre-approval for the construction loan from the same lender. We cannot get final approval for the building loan until we've signed a building contract.
To handle the work for the loan I've chosen to use the same person that handled the loan when we moved into this house, and also helped with the loan on our last house. I've got an established relationship with him and I can count on him to allow for my little foibles!
Posted by mnemtsas at 04:12 PM | Comments (0)
August 21, 2006
Land Contract Signed
Around 6:00pm the agent came round with the sale contract which be both signed. Our 2 yr old son thought the agent was hugely hilarious! Anyway, we have a 48 hr cooling off period. Still plenty of time for us to chicken out.
Posted by mnemtsas at 04:12 PM | Comments (0)
August 18, 2006
Suitable Land Advertised
The vacant land I mentioned last entry is still up for sale. Asking price in the advertisement is $135,000 to $145,000. Going back through some old newspapers we've found adverts for the same land for sale for $150,000-$160,000. Clearly the market is slowing down a little or the person selling the land has expectations that are unrealistic. After some discussion we've decided to put an offer in on the land. Rather than put in at $135,000 we've decided to go slightly higher at $136,000. We figure an offer at the absolute bottom of the asking range is less likely to get accepted. It also means we will knock out any offers at the absolute bottom of the range. If we get the land at this price it means we will come in well under our budget of $280,000 for house/land total.
Posted by mnemtsas at 04:09 PM | Comments (0)