Home loan vs building loan

Moses is building a house on a new property and asks whether it is better to take out a building loan or use his existing home to take out a further mortgage.

Maya replies: The decision would probably depend on what interest rate you could get on the two loans. However if the interest rate is similar, Meryl Delport, manager of home loans at FNB, says it would be best to apply for a building loan for the amount required to complete the property.

She says, however, there are requirements that need to be fulfilled as this is a building in progress, so it is best that you approach your banker to assist with the requirements.
Your bank would also need to determine the amount you can qualify for as well as advise what documentation would be required for a building loan.

FNB, for example, would require approved building plans, contract with the builder, copies of the builder’s national home builder’s registration certificate as well as the national home builder’s unit enrolment certificate for the property being built.

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