Absa | Protect yourself while building your home

Building your own home is one of the most exciting things you can do, but it is also one of the most complicated. When you build your own home, you will be in charge of all the building and the costs, on your own. That’s a big job!

Steps to protect yourself when building

Understand the process of building your home

Building any home starts with:

Finding vacant land to build your home.
Having building plans drawn up and approved - this will require an architect or draftsman and probably an engineer
Finding a builder
Applying for and getting your building loan approved. This can include or exclude the purchase price of land.
Building then begins.
You will make progress payments to your builder as the work progresses - at which point interest begins accruing on your loan.
Once building is completed, you will make the final payment and you will continue to pay back your building loan over the agreed term.

Understand the relationship between your builder, your bank and yourself

Understanding the relationship between these three parties will make it clear what your responsibilities are
The primary agreement is between yourself and your builder. This is your building contract - it stipulates what will be built and includes the plan and specifications of the building, the cost for the building as well as the timeframe.
The agreement between yourself and your bank is the building loan – your bank will lend you the money to build your home. You, in turn, will need to pay the contractors (builder) according to your requests and authorisations. In other words, we lend the money to you, you then pay your builder for completed work based on an assessor's inspection and calculations.
There is no agreement between your builder and the bank. Payments are always made to you.

Your builder will however have to:

Comply with Absa’s minimum building specifications
Sign a waiver of builder’s lien
Have Builder’s All- Risk Insurance
Be registered with the NHBRC (National Home Builders Registration council)
Register the home with the NHBRC
View all the required building loan documents.

Choose your builder carefully

Your builder is the most important part of your project. Make sure he/she is registered with the NHBRC
Your builder can give you a detailed building plan or you can get a draftsman or architect to do it for you.
Either way, your builder will give you a quote based on your building plans.
Be sure to check all the details - building a home can be costly and you need to ensure you are getting what you want at a price you can afford.
Take your time assessing your builder and his/her quote as this is one of the most important steps in your build.

Know how the NHBRC can protect you

The National Home Builders Registration Council (NHBRC) regulates the home building industry. Their role, among other things, is to represent the interests of housing consumers by providing warranty protection against defects in new homes within specified periods from the date the occupation certificate is issued.
Your builder must be registered with the NHBRC, they will then be required to build to the standards set by the NHBRC and provide means to correct any defects that could arise from the building of your new home.
Even if you are building an extension or renovating an existing property, we still recommend you first confirm that your builder is registered with the NHBRC - although they do not currently provide support for defects related to renovations or extensions.

Contact the NHBRC on 0800 200 824.

Check your building contract

You need to ensure that your building contract accurately states what you want built and includes the specifications, cost and the timelines.
The National Building Regulations and Building Standards Act 103 of 1977 sets out the standards that your builder must comply to. It may help for you to speak to a lawyer to understand how the act applies, so you know exactly what is required of your builder by law.
You cannot get a building loan without a signed building contract, so you need to make sure your contract contains a detailed breakdown of all costs and the work to be done, including the internal finishes.

Ensure quality before making payments

Your building loan will be calculated on the market value (not replacement value) of your property as if completed. Since the building loan will account for between 60% and 90% of the contract price, you will have to pay a deposit and the shortfall for some building costs before building starts.
When building starts, you will pay your builder with progress payments. A progress payment is a request by you to the bank to pay a portion of your loan to you, so that you can pay your builder for work as it progresses. Remember the progress payments are made to you - not your contractors or builder.
Your builder will give you a Progress Payment form to fill out when he/she requires payments for work completed. Never complete more than one Progress Payment form at a time.
Remember, it is up to you to verify that the work has been done to a satisfactory level, so be sure to check the quality of the building before making progress payments.

Read more about how progress payments work.

Insure your property

Your property must be insured from the date it is completed or from the date that occupation takes place.
You can get insurance from us, or if you use another insurance provider, you will need to submit the policy for us to approve.

See what insurance you need as a homeowner and how we can help.

Building your dream home

There’s a lot to think about when building your dream home but it is always worth your time - and your money - to carefully consider every step of your build.

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