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Progress billing for construction sample for Building services

Planning to build a house you'll generally be  faced with two options a turnkey contract or   a progress payment contract we're going to  talk today about progress payment contracts thanks for watching if you're watching this on  YouTube don't forget to hit subscribe below all   of the ad revenue that will generate from these  videos will go to local New Zealand charities   so you're looking to build and your two main  options are generally turnkey and progress payment   the key difference is when you settle on the  property when you take ownership of the property   with the turnkey the developer builds the property  and at the end of the development you purchase it   from them with a progress payment you buy the  section and the builder comes and builds the   house on the land while you own it typically if  you compared two identical contracts you would   find that the progress payment contract is cheaper  than the turnkey because the developer is paying   the interest on the loan while they build it but  on a progress payment you own the section you're   paying interest on the mortgage and the builder  just comes and builds your house now it's called a   progress payment contract because the builder will  send you an invoice at specific and pre-arranged   progress points in the build typically these  are when the concrete slab gets laid down   when the frames go up when the cladding goes on  when the roof goes on and when the inner walls are   done now they can vary from contract to contract  but the typical one would have six or seven steps   in there where you will be given an invoice of  fifty thousand sixty thousand dollars you give it   to the bank the bank knows that invoice is coming  because they've seen the contract already the   bank releases that money and you pay the builder  now sometimes the bank will pay the builder but   generally the bank doesn't like shifting money  out of your bank account they prefer that you do   that for obvious reasons now there's one thing  to watch and this isn't to do with the builder   but scams that have gone on with progress payments  in the past there was one scam a couple of years   ago where scammers into a builder's email  sent an invoice to the client but changed the   bank account number to their bank account and  received the big lump sum of money obviously it   doesn't happen very often or we'd hear about it  more but it's always good to check the invoice   check that bank account number is the same as it  has been in previous invoices it may not even need   to be a scammer it might just be a rogue employee  always check the invoices as they come through   your mortgage broker will check their invoices as  well and so will the bank so let's put in those   extra layers of protection not a thing you have to  worry about but just something to keep an eye on   as the build continues the mortgage will grow it  will generally stay on a floating rate while it   grows otherwise you'd end up with sixty thousand  fixed for one year and two months later another   sixty thousand fixed for another year that the  banks generally like at all to stay as floating   and at the end of the contract you can fix it  for however long you like in one lump sum or two   lump sums now the builder generally wants the  last sum of payment to be paid upon practical   completion this is where a certificate says we  the builders have done everything we need to   do we're just waiting for code of compliance  please send us the last payment the bank   does pay on practical completion sometimes but  often we'll want to see the code of compliance   at the end to make sure it's been done so this  can often be a bit painful it's good to know   early in the contract when the builder will want  that last payment and talk to the bank about   that early one thing i would definitely get you  all to do is get a lawyer to check the contract   make sure the payments make sense make sure  you're not paying for 90% of the home when only 30% has been done the bank won't like that and you  shouldn't like that either check your progress   payments make sure they are relative to the amount  of work that's been done and the value that's been   added to the house because if a builder goes out  of business halfway through the build you want to   make sure you've only paid for what's been done  now i've been talking a lot about negative stuff   progress payments are actually really cool way  to build just make sure you check the contracts   the banks love them particularly if they're from  a registered master builder or a licensed building   practitioner thanks for watching and don't  forget to hit subscribe or talk to you next time