Summary of Reserve Accounts

The purpose of the reserve accounts is to set aside an estimated sum to cover known costs outside the builder’s contract and any unexpected costs. These reserves are optional, and if not used will be credited upon completion.

Interest Reserves

These are set aside to cover accruing interest costs. Interest will therefore compound until completion — this is referred to as ‘interest capitalisation’. You will continue to be invoiced monthly to allow you to monitor your costs, and you can make contributions against these invoices as and when you are able – stress free money management! If your interest costs have exceeded the reserve account, you should start paying these invoices immediately.

image5Contingency Reserves

These reserves are included to cover variations you have made along the way, or cost overruns from your PC sums (provisional cost estimates), and may include reimbursing architect fees, building permits, upgrades and other unexpected costs.

Owners Care Reserves

To ensure the whole project is costed to completion the owners care reserve will cover all specific work being completed outside your build contract – those costs specified by the valuer and your lender. These would normally include driveways and paths, generic landscape and fencing (if required). Other lenders may not allow you to include these costs as part of your purchase, but may still require the work be completed using your own money – which could leave you in financial difficulty if all your funds have already been applied to the build.

Inspection Reserves

NewBuild Plan™ uses trade-qualified inspectors to assess the value of work completed, and to approve payments on the predetermined schedule.
You and your builder will have a copy of this schedule before construction commences. The cost of these inspections is normally considerably lower than for progress valuations, and has been included in the ‘acquisition price’. (See Acquisition Price).

It is not the cost of building a new home that people find difficult to manage – it’s the stress of paying rent or an existing mortgage during the building process that worries most.

Administration Fee

NewBuild Plan™ charges a nominal management fee, which is incorporated into the loan and paid at the first progress payment. You will not be required to have your funds distributed by a solicitors trust account – a significant savings.

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