The questions and original answers

In New Zealand, the most important thing is to confirm that your renovation lending is formally approved and that you can safely meet the builder’s deposit requirements before paying anything. A bank saying you may be able to borrow more is not the same as having an approved loan ready to draw down.

You want to avoid being in a position where you've paid a deposit, the builder expects you to proceed, but the bank won't release the money or the renovation costs turn out to be higher than expected.

Here's what I'd check before paying the builder.

1. Confirm the bank has formally approved the additional borrowing

Ask your bank or mortgage adviser to confirm, preferably in writing:

• The loan is formally approved, not just an indication of how much you might be able to borrow.
• The approved amount is sufficient to cover the renovation, including the deposit, progress payments and final payment.
• Whether the approval is conditional on anything, such as a registered valuation, detailed builder's quote, consent documentation or evidence of your contribution.
• When and how the money will be available.
• Whether the bank will pay the builder directly or release funds to you.
• Whether you must provide invoices, progress claims or inspection reports before funds are released.

The key question to ask is: "If we sign the building contract and pay the deposit now, are there any outstanding conditions that could prevent the bank from funding the renovation?"

Don't rely on a verbal indication that the bank is comfortable with the project. Get clarity on the conditions that must be satisfied before the money becomes available.

2. Check the deposit amount and whether you can get it back

Before transferring money, confirm:

• How much the deposit is and exactly what it covers.
• Whether it is for booking the builder's time, ordering materials or forming part of the overall contract price.
• Whether it will be credited against the final price or an agreed progress payment.
• What happens to it if the bank declines the loan, delays releasing funds, or the required building consent isn't granted.
• Whether the builder will refund it if the project cannot proceed for reasons outside your control.

Get the refund conditions written into the contract. Don't assume the deposit is refundable just because your bank hasn't approved the loan yet.

New Zealand Consumer Protection advises that deposits are negotiable and recommends paying no more than 10% of the total cost in ordinary circumstances, although a larger deposit can sometimes be reasonable for purpose-built products. There is no general requirement to pay a deposit simply because a quote has been accepted. The contract terms matter. Consumer Protection: Quotes and estimates.

My recommendation: If your borrowing is not yet confirmed, ask the builder to make the deposit refundable if finance is not approved by an agreed date, or to defer payment until the bank's conditions have been met.

3. Make sure the building contract protects you

Before paying, read the contract carefully. It should clearly explain the following.

What to check	Why it matters
Total contract price	Know what you are committing to pay, including GST.
Scope of work	Make sure the agreed renovations, materials and finishes are specified.
Deposit and payment schedule	Confirm the amount and timing of every payment.
Start and completion dates	Understand when work should begin and finish, and how delays are handled.
Variations	Establish how additional work and extra costs must be approved.
Cancellation terms	Know your obligations and potential losses if the project cannot proceed.
Defects and warranties	Understand how problems will be rectified and what protections apply.
Insurance	Confirm what insurance is in place during the renovation and who is responsible for it.

If your residential building project costs $30,000 or more, including GST, New Zealand law requires a written building contract. The builder must also provide a disclosure statement and consumer protection checklist before you sign. You can request these documents for smaller projects, too.

See the Ministry of Business, Innovation and Employment's guide to building contracts.

If the contract is substantial or contains complicated cancellation and finance conditions, consider asking your solicitor to review it before you sign or pay.

4. Check that the entire renovation is affordable

Even if the bank agrees to lend more, check that you have enough money to complete the project, not just to get started.

Confirm the following:

• The total budget: Include the builder, subcontractors, materials, design fees, council fees and any required inspections.
• A contingency fund: Renovations can uncover unexpected issues, such as water damage, outdated wiring or structural problems. Ideally, retain a financial buffer rather than committing every available dollar.
• Your own contribution: Establish how much you need to pay from savings and when.
• Interest and repayments: Ask how much your mortgage repayments could increase and whether the renovation lending will initially have a floating interest rate.
• Payment timing: Make sure you can meet the builder's payment schedule if the bank takes longer than expected to release funds.

Banks may release renovation funds in stages rather than as a lump sum. They may also require invoices, valuations, consents and evidence of insurance before releasing money. Check your particular bank's requirements rather than assuming the full amount will be available immediately. BNZ: Applying for a build loan.

5. Confirm the consents and insurance

Before committing to the work, establish:

• Whether the renovation requires building consent or any other council approval.
• Who is responsible for obtaining the necessary consents.
• Whether the builder has appropriate qualifications and, where required, a Licensed Building Practitioner.
• Whether your existing home insurance covers the property during construction.
• Whether the builder has appropriate insurance and what protection it provides.
• Whether your bank needs to approve the renovation plans or obtain a valuation of your property.

Don't assume your current house insurance automatically covers every risk associated with major building work. Tell your insurer what you're planning and ask for confirmation of the cover you will have during construction.

The Ministry of Business, Innovation and Employment provides further guidance in its homeowner rights and obligations guide.

6. Check the builder before transferring the money

Before making the deposit payment:

• Verify that the contract names the correct builder or building company.
• Check references from previous customers and, where relevant, the builder's licensing.
• Ensure the deposit is payable to the correct business.
• Independently verify the bank account details, particularly if the builder has emailed you new or changed payment instructions.
• Obtain a receipt once the deposit has been paid.

Keep copies of the signed contract, quote, invoices, loan approval and all communications about the deposit.

Your final checklist before paying

I'd want these five things confirmed before transferring any money:

• Bank: Written confirmation of the additional lending approval, any outstanding conditions and when funds can be accessed.
• Builder: A signed contract setting out the work, price, deposit and payment schedule.
• Deposit: Written agreement about how it will be used and whether it can be refunded if finance falls through.
• Project: A realistic total budget, including a contingency, with a clear plan for funding every payment.
• Legal requirements: Any necessary consents, insurance arrangements and other conditions are understood and appropriately addressed.

If the bank's approval is still conditional, I'd ask the bank and your solicitor to confirm whether it is safe to sign the building contract and pay the deposit now, or whether you should wait.

One important question

Has your bank actually approved the extra borrowing in writing, or has it only said you may be eligible to borrow more?

That distinction makes a big difference to the safest next step.