Building - Mortgage Issue

natbut · Sep 03, 2007 6:09 pm

I'm looking to build a house and I need a 100% loan.

I have just found out from the builder that once the contracts are ready I will need to pay a $5000 deposit within 2-3 days.

I enquired with a mortgage broker how long it takes to approve a loan and they said that it takes approximately 2 weeks. I can't get a loan without the contracts (and quotes for various items like air conditioning etc).

What I am wondering is if I get pre-approval for a loan will that mean I would be able to have the money faster? ie I would be able to give the $5000 deposit to the builder with 2-3 days of contract.

Or if I can't do that, a friend is willing to lend me the $5000 but would a mortgage reimburse that?

I will be speaking to a bank/broker about this but just thought I'd find out if anyone here knew the answer or had been in a similar situation.

TIA

stonecutter1309 · Sep 03, 2007 6:15 pm

I was told that pre-approval may get you the money a little quicker - maybe a few days.

But 2 weeks for full loan approval and access to funds seems too tight. We've been recommended to give ourselves 6 weeks for this process. Standard bank processing is meant to be 4 weeks - but sometimes if a contract is printed wrong, or some other variation is required - then that takes extra time.

I'm not sure if a mortgage would allow a cheque to be written to a friend - you'd need some sort of contract (vaguely thinking back to my uni law subjects).

When is this whole process happening? You'd be amazed at how much you can save in a short time (e.g. 2-3 months) if you really knuckle down.

natbut · Sep 03, 2007 6:18 pm

It's happening in about 3-4 weeks.

I'd never planned to get a 100% mortgage, this all happening a year too soon. But it's an amazing deal.

stonecutter1309 · Sep 03, 2007 7:58 pm

Hmmm - best speak with your broker/bank - sorry!

Buggy · Sep 05, 2007 5:31 pm

natbut

Or if I can't do that, a friend is willing to lend me the $5000 but would a mortgage reimburse that?

TIA

Normally the bank will pay directly to your builder. They will either write you a cheque or direct credit to your account any amount that you had paid to your builder.

G'd luck.

Tam · Sep 05, 2007 5:38 pm

Sometimes the builder may let you incorporate that deposit in with the first installment which is usually slab.

Of course you would need the unconditional finance letter for the builder.

northlakes · Sep 05, 2007 8:06 pm

Hi Natbut,

Just go slowly here...remember, the lender may not place the same value on your proposed construction. Do you have equity in the land or does the loan have to cover both??

With our builder, we paid $1k up front to get the soil tests..etc Then at tender presentation we paid a further $1.5k. (It's at this point you get the bank to complete a valuation on the proposed dwelling, which takes into account the area you wish to build). Once the bank approves the loan amount, based upon the valuation, you're at contract stage...we paid 5% deposit (less the $2.5k already paid.)

I'd warn against borrow money from elsewhere the cover the deposit...just in case the the bank does not approve.

One last thing.....make any deposit paid to the builder subject to unconditional approval by your nominated leander.

Cheers,
Mark