Turnkey Home Loans: How Finance Works When You Buy a New Build
With a turnkey purchase you pay a deposit now and the rest when the house is finished. That's simpler than a construction loan. The risk sits in the gap between signing and settling.
Turnkey versus a progress-payment build
| Turnkey | Progress-payment build | |
|---|---|---|
| When you pay | A deposit on signing, usually 10%, and the balance on completion. | In stages as the build advances. |
| Who funds construction | The developer or builder. | You do, through a construction loan. |
| Interest during the build | None, because you haven't borrowed yet. | Paid on each amount as it's drawn. |
| Main risk | What happens between signing and settlement. | Cost overruns and build delays. |
Turnkey suits buyers who are renting while they wait, since they aren't paying rent and a mortgage together.
The timing problem
This is what catches people. A home loan pre-approval usually lasts a few months. A build can take a year or longer. So the approval you had when you signed won't be the approval you settle on.
Closer to completion you apply again, and the lender assesses you as you are then. If your income has dropped, you've taken on debt, lending rules have tightened or interest rates have risen, the answer can differ. You, meanwhile, are committed to the purchase.
Some lenders offer longer approvals for new builds. They're worth having, with the understanding that they're still conditional on your circumstances not changing. During the build, don't change jobs if you can avoid it, don't buy a car on finance, and keep your accounts tidy.
The valuation at completion
The lender will usually order a registered valuation when the house is finished. If the value has fallen below the contract price, the lender lends against the lower figure and you have to find the difference. Keep a buffer for this, or buy with more deposit than the minimum.
Smaller deposits on new builds
New builds are exempt from the Reserve Bank's loan-to-value restrictions, so lenders have more freedom to accept a deposit under 20%. Many will go to 10% for a turnkey home, and the KΔinga Ora First Home Loan can be used for new builds at 5%. Lender policy still applies, and low-deposit pricing may too.
KiwiSaver can often be used for the initial deposit, not only at settlement. The rules about paying it to a stakeholder are specific, so involve your lawyer and KiwiSaver provider before signing.
Read the contract with a lawyer first
- Sunset clause. The date after which either side can cancel if the build isn't finished. Check who can use it. A clause that lets the developer cancel and resell at a higher price is a known risk.
- Where your deposit is held. It should sit in a solicitor's trust account, not be released to the developer.
- Price changes. A true fixed price has no escalation clause.
- What's included. Driveway, fencing, landscaping, floor coverings, window coverings.
- Completion requirements. Settlement should depend on a code compliance certificate, and for a new unit, a separate title.
This article explains how New Zealand lenders generally assess these situations. It is general information, not personalised financial advice, and lender policy changes often β check your own position with a registered adviser. Official sources: Reserve Bank of New Zealand for lending policy and the OCR, and Sorted.org.nz for independent government-backed money guidance.
Turnkey home loans: common questions
Looking at a turnkey or house-and-land package?
Tell us the price, expected completion date and your deposit. We'll line up an approval that fits the build timeline and flag the risks before you sign.
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