I get asked a lot about the difference between a TurnKey contract and a house and land package, so I thought I’d cover it this week. If you’re looking at building, chances are you’ve already come across these terms, and it’s easy to get confused about which option is best.
So, what’s the actual difference?
With a house and land package, you buy the land up front and then make payments to the builder as the house is being built. These are called progress payments and they get made in stages as the build ticks along. Most banks will let you keep the loan interest only during the build, which helps. But in most cases, you’re still paying rent while also covering interest on the new loan. Or, if you already own a home, you might be paying interest on both loans at the same time. That can be a bit of a stretch, especially if you’re juggling the build timeline or haven’t sold your current place yet.
The upside is that this type of lending is usually done through a main bank, so you’re getting a residential loan at a sharper rate. If you’ve sold your existing home or can handle the cash flow, this option can work really well.
A TurnKey contract works a bit differently. In this case the builder funds the build, and you pay for the home once it’s 100 percent finished. That means no progress payments, no loan repayments during the build, and you only need to settle once the house is move-in ready.
TurnKey can be a great fit if you’re renting and don’t want to be stuck paying rent and a mortgage at the same time. It also works well if you already own a home and want to wait until the new place is ready before you sell. And because you’re not making payments during the build, you can keep saving in the background, which definitely helps when it comes time to settle.
The trade off?
TurnKey builds do tend to cost a little more. That’s because the builder is usually funding the build with commercial lending, which comes with higher interest rates. That cost typically gets built into the final price. But for a lot of buyers, the flexibility and breathing room TurnKey offers is well worth it. You might even get to boost your savings before moving in, since you’re not making mortgage payments while the home is being built.
At Colab, Dan and I have spent years helping clients with both types of finance. We’ve also launched TurnKey Pro, a flexible funding option we offer to builders who want to make TurnKey a reality for their clients. We work closely with great builders like the Hive team to give buyers more choice, better advice and a smoother path to getting into their new home.
If you’re not sure which option is right for you, feel free to get in touch. And if you want to dive a bit deeper, check out our guide to building new. It’s full of helpful info, minus the boring finance jargon.
Catch you next time.
Sam
Colab Mortgages
Find more from Sam at https://www.colab.kiwi/
