Build your home with an FNB Building Loan

Qualifying criteria

Available to individuals, joint applicants, and property-owning juristic persons
The term of the loan must expire before you reach the age of 60

Builder requirements

FNBB Building Loan policy is strictly a supply arrangement and projects are managed on the cost-to-complete (CTC) principle.

This means the following applies;

No mobilisation fee for the contractor.
No prepayments for building materials.
Money is only disbursed upon completion of a stage onsite.

Documentation required prior to kickstarting a project entails the following

Contract between client & contractor.
Contractor's All Risk Insurance (CAR).
Waiver of builders lien (form provided by the bank).
Cession of insurance policy (form provided by the bank).
Resident engineer's profile including PI, practicing license (applicable to double-storey properties only).
Schedule of finishes (not mandatory but recommended for clients).
Progress claims are eight (8) in total as captured in the loan agreement.
For single-storey properties, claims should be accompanied by the council inspection certificate (substructure & superstructure).
For a double storey - claims to be accompanied by resident engineer's report. 5% retention to be released after 6 months post completion.

At the end of the project, the following should be provided to the bank

Occupation permit.
BPC electrical compliance certificate.

The bank will then conduct a final valuation of property for insurance purposes. As the customer you need to provide a satisfaction letter post completion of development.

Your responsibilities

Inform the builder and the bank of any problems, concerns or delays in the building process. The bank will not act as clerk of works on your behalf and in need, you may want to appoint a suitable qualified professional person to supervise or oversee the project. It is important to note that you have appointed the builder and all disputes are to be discussed directly with the builder and the NHBRC where deemed necessary.
Ensure that the contract you sign with the builder does not comprise of conditions which will be prejudicial to you. If in need, consult with a legal advisor or a suitably qualified professional to assist you before signing the contract.
Request progress payments only if you are satisfied with the progress and the amount requested by the builder.
Service your interim interest by making regular monthly repayments for these amounts as this will avoid any shortfall that may occur.
Ensure that you and your builder understand all the bank's conditions of loan and that all the conditions are being complied with at the times required/stipulated by the bank.
Ensure that on completion of the building that your Home Owners Comprehensive Insurance Cover is in place. The Contractor's All Risk Insurance Cover only provides cover from the date when construction commences until date of completion/occupation.

Important points to consider

FNB Home Loans will not finance 'owner-builders'.
Unconventional construction methods will not be considered, unless prior approval is received from the FNB Property Valuations Department.
Building operations must commence within 3 months after registration of the mortgage and must be completed within a further 9 months thereafter. Building to be completed within 12 months of registration.
The building contractor must carry Contractor's All Risk Insurance Cover and proof thereof must be submitted to the bank.
A property valuer will inspect the building progress with each progress payment request, and will report to the bank accordingly, prior to any progress payment being made.
Interest rates are limited to variable until the building process is complete.
Customers may not be granted the Flexi, Readvance or Future Use options on their building loan until it has been fully completed and the loan converted into a traditional home loan.
It is mandatory that building loans interest payments are settled via debit order or salaried stop order, and the responsibility for any interest payments rests with the mortgagor.
The application will be assessed on receipt of the necessary documentation in line with the policy and lending criteria of the bank. Assuming the bank is in a position to assist, a minimum deposit of 10% of the total package price (land + contract amount) is required in all instances; this however could increase dependent on the credit profile score of the applicant(s). The deposit will be based on the lower of the total package price, or FNB's assessed market value on completion. If the applicant credit profile score determines a loan to value amount less than 90%, no amount is redeemable at the end of the construction period. If for any reason during the period of construction, the applicant(s) credit profile deteriorates, the bank reserves the right to retain the redeemable amount.

Loan limitations

Not applicable to 'owner-builders'.
You have 6 months for a single storey and 12 months for double storey to complete the building. Construction work must commence within the first 3 months following registration of the bond.
Your loan term is limited to 240 months.
You only pay interim interest on the building loan until the building is complete. Once it is complete normal capital and interest payments become payable. If the construction period takes longer than 12 months, interest and capital become payable once the 12 months period allocated to the construction expires (unless the customer has obtained approval from the bank to extend the building period).
You will be limited to the variable interest rate until the building has been completed. On completion of the building you can apply for progress payments at any stage during the construction process provided that sufficient work has been completed and the bank is satisfied with the progress. A maximum of six (6) progress payments will be allowed, based on the work completed.
The application will be assessed on receipt of the necessary documentation in line with the policy and lending criteria of the bank. Assuming the bank is in a position to assist, a minimum deposit of 10% of the total package price (land + contract amount) is required in all instances; this however could increase dependent on the credit profile score of the applicant(s). The deposit will be based on the lower of the total package price, or FNB's assessed market value on completion.

Useful terms

Purchase price deposit

This is a payment made to secure the property. The amount will be stated in the Offer to Purchase contract.

Amount varies according to property value.

Architect

Their fee to design, draw and submit the plans to the local council for approval.

Architects' fees will vary according to the company chosen and design of plans.

Builder or contractor

The builder will provide you with a contract price which will include building costs, materials, etc.

This will also vary according to the design, structure and finishes used.

Industry professionals

These professionals may include the use of a quantity surveyor, structural engineer etc. and depending on the professional chosen, their fees will vary.

Transferring costs

A fee that is paid to the attorney nominated by the seller to transfer ownership of the property.

Amount varies as per the legal conveyancing fees schedule.

Transfer duty only apply on freehold

This is a government tax, which you will need to pay based on the purchase price or the open market value of the property, whichever is higher. In property sales, either transfer duty or VAT will be applicable depending on whether the seller's line of business is property trading. Transfer duty is not applicable in respect of tribal land however the transaction may attract VAT, depending on the type of seller.

Amount varies as per the legal conveyancing fees schedule.

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