Building Loans | Home Loans SA

By: Homeloans  11-11-2011
Keywords: Home Loan, Building Loan

What is the difference between a home loan and a building loan?

A home loan pays one amount when your loan is registered, while a building loan pays between 3 and 4 progress payments during the building phase. The qualifying criteria for a home loan and a building loan is exactly the same although some additional documents are required for a building loan.

Stages of a Building Loan

There are 4 stages in the building of a house and a set of documents is required at each stage, as outlined below.

Stage One – Application Stage

A copy of Provisional Plans. working drawings or Sketch Plans (plans, sections, elevations and a site plan are required)
A signed building contract, including a Home builder’s warranty, a builder approval form
A detailed quote or tender from the contractor
A schedule of Planned finishing dates
A copy of the Contractor’s NHBRC Certificate

Stage Two – Prior to Registration

The original NHBRC enrollment certificate, confirming that the property has been enrolled with the NHBRC.
The original authorization for the contractor’s payment (NHBRC form PA002). This form is required if you need the bank to pay the NHBRC levy from your home loan.
All risk insurance cover, covering the builder against any loss or damage that might incur during the contract period. Covering the builder against fire, lightning, explosion, earthquakes and storm damage, as well as against theft of any building material.
- Waiver of Builder’s Lien (required before the first progress payment can be made) The waiver explains the minimum requirements with regards to the materials to be used in the building process.Banks require the builder’s right of retention to be waived in favour of the bank (in writing); thereby making the bank the preferred creditor before any payment will be made.

Stage Three – Prior to First Progress Payment

Plans, approved by the relevant municipality
An engineer’s clearance certificate where applicable

Stage Four – Prior to Final Progress Payment

A building loan Letter of Satisfaction, signed by you once you have thoroughly inspected your new home after completion.
An electrical certificate and occupational certificate from you local authority
Any other specialised certificates regarding your property ( for example, a waterproofing certificate)

Features of a Building Loan:

  • Progress payments
    To pay these progress payments it is necessary for the builder to provide a detailed quote or tender with a schedule of finishes. Most banks allow between three and four, but a maximum of six, progress payments, made to the builder at intervals during the stages of construction, allowing you to pay only for the completed work.
  • Monthly interest
    Monthly interest on a building loan varies from one institute to another, but usually you can choose between a fixed or variable rate. Usually monthly interest shall be charged on each draw down payment you request. It is mandatory to start servicing your interest once your first progress payment is made.
  • Repayments
    Most banks offer you between 20 and 30 years to repay your building / home loan. Repayment of your loan only starts when the loan has been paid out in full, after completion of the building.
  • Reputable builders
    Only reputable builders, registered with the NHBRC, are allowed to build your home with a building loan, ensuring that your home is built according to the SABS standards.

Before you make the final payment to the builder, an occupation certificate must be issued by the local authority. This will ensure that the property has been inspected and all requirements are met by the local authority. The rest of the alterations are to be completed within the period stipulated by the loan.

Keywords: Building Loan, Home Loan

Other products and services from Homeloans


Get Your Pre-Approval For Your Home Loan Today

By getting a pre-approval for a home loan you will speed up the buying process and with a pre-approval certificate in the hand, agents and sellers will take you seriously when knowing that you are financially secured. Quicker Loan Disbursal or Processing PeriodBuyers with a pre-approval will have the benefit of a faster loan processing period, again saving you some valuable time.


New Home Loans | Home Loans SA

We can help you get your home loan approved at the best possible rate by applying at all four major banks and negotiating on your behalf. We offer expert advice, giving you the opportunity to sit back and relax while we do the work for you. We have a high success rate in getting home loans approved because this is what we do every day. We help you with the structuring of your loan to best suit your financial needs.


Further Home Loans | Home Loans SA

Further loans can be used to finance renovations to your home, but some homeowners use the money to buy new cars, consolidate their debt or for other capital expenditure. This is one of the cheapest ways to access finance because home loan rates are typically the lowest of all other financing methods. The total of these costs is usually only about 1% of your total loan amount, but must still be kept in mind.