What are PC Sums, and why do the banks care?

One thing that often catches people out when building a home is PC sums, also known as Provisional Cost sums.

If you’ve never built before, PC sums can be confusing. So in this fortnight’s column, I wanted to break down what they actually mean, why builders include them, and what banks think about them, especially if you’ve got less than a 20 percent deposit.

What is a PC sum, anyway?

A PC sum is essentially a placeholder cost in your build contract, an allowance for something that hasn’t been fully priced yet. These are most commonly used for things like groundworks, kitchens, bathrooms or landscaping, where the final cost can vary depending on your selections or what’s uncovered on site.

They are completely normal and fairly common. Builders include them to help keep things moving while the details are being finalised.

So why do banks get nervous about them?

When a bank approves your home loan, it is based on the total build cost. If there’s a big PC sum in the contract, it means part of the cost is still unknown, and that uncertainty makes lenders cautious.

This matters most when you’ve got a low deposit. If you are borrowing more than 80 percent, many banks will want to see a fixed price contract with minimal PC sums or “owner’s care” items. They want confidence the build price won’t blow out, especially when there is not much margin in the loan.

Some banks may still accept small PC sums, especially for things like earthworks which are hard to price before the digger starts. But it depends on the lender, the size of the allowance and your deposit.

What are the alternatives?

One way to manage PC sums is to include a maximum allowance in the contract. This gives the bank clarity about the potential cost and helps avoid delays with your finance approval.

For example, instead of a PC sum of “$15,000 for groundworks,” you could have a line that says “Groundworks allowance capped at $15,000.” Same number, but a lot more bank friendly.

How Colab can help

This is exactly the kind of thing we help with at Colab. We work with your builder, the lender and your solicitor to make sure the contract is structured in a way that works for the bank. We will flag anything that could cause an issue, suggest solutions, and make sure you are not caught out when it comes time for the lender to issue approval.

We are the glue between your build team, the bank and you. Our goal is to keep everything aligned and your project on track.

Got questions about PC sums or need help reviewing a contract?

Get in touch. This is our bread and butter, and we are always happy to help.

You can also find out more about financing a new build and download our guide to buying new builds here.