Custom designed construction projects are without a doubt one of the most expensive ventures one can take during a lifetime, and it’s not always easy to obtain adequate funds for a custom built building. The easiest way is to use our savings. However, this option may work only for smaller custom built projects, such as decking/pergola jobs or minor internal refurbishments.

For most construction projects, we will need to talk to some sort of financial institution. I don’t recommend that you talk directly to your bank, as the person to whom you speak there works nine to five and their wage will most likely not change if they organise your loan. Construction loans tend to be complex, and trying to get a generally unmotivated person to carry the extra burden of your loan may end up in a lengthy process full of frustration and disappointment. It’s much better to talk to mortgage broker. They’re a bit like custom home builders in that they get paid only for completed jobs, so they’ll be much more motivated to get your finances in order as soon as possible.

With a financial institution involved, there are two major ways of financing the custom built project. The easiest and most straight forward way is that you use your existing equity to back your loan. In this case, the financial institution will generally just hand you the cash without further questions, and you will pay the custom home builder from your account as the work progresses. This type of loan is mainly used for home renovations and home extensions. The good thing about these loans is that they provide flexibility. We often agree with owners to do just part of a job (mainly heavy duty structural stuff) and the owner can engage his own subcontractors to complete the custom built project. This saves some builders margin on the custom built project.

When there’s not enough equity available, financial institution can lend against the building contract. The domestic construction industry in Australia is heavily regulated, and each building contract over $17,000 must to be backed by home owner warranty insurance. The home owner warranty may lead you to believe that this insurance protects you, but this is only partially true; it’s mainly created to protect the Australian financial industry. If a custom house builder is unable to fulfil his contractual obligations, the home owner warranty insurance will cover the cost of completing the contractual obligations.

When a custom home building contract is needed to secure the finances, the financial institution will carefully assess the contract and associated plans to ensure that the contract price is in line with industry standards and that the bank funds will be backed by real brick and mortar. With unconventional building done by Toto Properties, we often disagree with bank valuers and often lengthy explanations are needed as to where certain project costs come from. With these types of loans, the bank pays the custom house builder directly as the work progresses, according to the construction milestones defined in the contract. The owner isn’t involved in the transaction, except for forwarding the custom home builder’s invoice to the financial institution. Before final payment, the bank will usually send their valuer on site to confirm that the construction has been completed as per the contract. Some financial institutions also require a certificate of final inspection from the building surveyor.