Browse Forums Building A New House 1 Mar 26, 2009 4:27 pm Hi All, hoping someone could help me end my confusion. If I want to buy a plot of land, and then engage a builder to build a house do I need 2 loans? And when do I start making repayments? The Commonwealth are saying that if my land costs $200k, I need to start making repayments as soon as I have settled on the land. Then the construction loan is a separate entity that I start repaying once Handover is complete. Is this the same with all of the lenders? My impression was that they would lend the whole amount for land and house, and then when the build is finished I start repayments on the total amount. They say that is only for "House and Land" packages. Any clarification on this would be great and if anybody knows of any Lenders that differ I would like to hear of them! Cheers, Re: Home Loan Ignorance - Land & House 2Mar 26, 2009 4:36 pm Hi, I'd say it all depends on how quickly you intend to build? We are going through the CBA. We got a land loan for the block last year (knowing that we wouldn't be ready to build until now) and have been making interest only payments on it since settlement (You have 2 years to start building). We are now awaiting formal approval for the construction amount. When approved, it will be set up as a new loan for the total amount (land + construction). Upon the first progress payment, they will repay the land loan and draw down whatever the amount due is for the progress payment. We then pay interest only on the loan until the loan is fully drawn, at which the principal and interest payments will commence. Hope this helps Dunno about the other lenders, but l guess they would work the same way? Thlo would know though. He'll be able to clarify further. Re: Home Loan Ignorance - Land & House 3Mar 26, 2009 4:41 pm We have two separate mortgages, because we bought land about a year before we started building. So, we started paying on the land when it settled and then we pay for the house more and more as it is constructed (because you have to pay progress payments to the builder). In this case, we decided to go interest-only for the first year for both mortgages to reduce the initial repayments while we were building/renting. After the first year, it shifts to a principal+interest repayment. I have no idea how the "home and land" packages work, where you get it all-in-one from a single builder/developer. Re: Home Loan Ignorance - Land & House 4Mar 26, 2009 4:44 pm Mine is through westpac and pretty much how Thorney described it although mine only goes to interest only payments when construction starts. You need to pay your builder in stages and each stage varies in the amount which will be set out in your contract. You need to start paying your land back as soon as it has settled. Once I start building the loan will be re-done by the bank to incorporate land and house and then once you start building it is interest only payments on the land amount plus however much the bank has paid to the builder. For this example, pretend you are getting 100% from the bank - So say your land is $150,000 and your house is $200,000. You have settled on your land and you have made a 10% progress payment to your builder for your house ($20,000) - you need to pay the interest on $170,000 (land and 10% of build). Then when you make another progress, this time say 25% you will then be paying interest on $220,000 'A bottle of wine contains more philosophy than all the books in the world.' Louis Pasteur Vegie garden: viewtopic.php?f=19&t=27637&start=0 My Backyard Adventure Re: Home Loan Ignorance - Land & House 5Mar 26, 2009 4:50 pm We have the same arrangement with ANZ.. We have a land loan for the land, and a construction loan for the house. We've opted to go for full payments from the start, (e.g. no interest only) as we're lucky in that we dont have rent at the moment etc (living with the inlaws). Will work out that we are overpaying the loan to begin with, which always is a nice way to start if you can afford it. -------------------------------------------------------- Building in Highlands Craigieburn Status: Building the Laundryless 25.5: Slab Complete Re: Home Loan Ignorance - Land & House 7Mar 26, 2009 5:47 pm lisanne For this example, pretend you are getting 100% from the bank - So say your land is $150,000 and your house is $200,000. You have settled on your land and you have made a 10% progress payment to your builder for your house ($20,000) - you need to pay the interest on $170,000 (land and 10% of build). Then when you make another progress, this time say 25% you will then be paying interest on $220,000 Does this mean that when you have paid all the progress payments except the final 10% for completion, i will be paying interest on the land loan and 90% for the house loan? Wouldnt this mean the interest payments would be huge? Appreciate your thoughts. Re: Home Loan Ignorance - Land & House 8Mar 26, 2009 5:55 pm yep our interest payments will be huge right at the end. Its nearly the same at the end as principle and interest. Mainly because the first couple of years of payments is nearly all interest anyway Living in Caloundra Thread****** Lovin my house all finished!!! Now tackling the HUGE task of the Garden- viewtopic.php?f=31&t=14782 Re: Home Loan Ignorance - Land & House 9Mar 26, 2009 5:58 pm Mikenrochelle lisanne For this example, pretend you are getting 100% from the bank - So say your land is $150,000 and your house is $200,000. You have settled on your land and you have made a 10% progress payment to your builder for your house ($20,000) - you need to pay the interest on $170,000 (land and 10% of build). Then when you make another progress, this time say 25% you will then be paying interest on $220,000 Does this mean that when you have paid all the progress payments except the final 10% for completion, i will be paying interest on the land loan and 90% for the house loan? Wouldnt this mean the interest payments would be huge? Appreciate your thoughts. That's right and because most loans are 30 years, the interest is HUGE. 'A bottle of wine contains more philosophy than all the books in the world.' Louis Pasteur Vegie garden: viewtopic.php?f=19&t=27637&start=0 My Backyard Adventure Re: Home Loan Ignorance - Land & House 10Mar 26, 2009 6:00 pm Re house/land packages - the majority of them are like ours - you pay for the land on land settlement, if you have a loan you will start repayments straight away. You may be able to get an interest only loan, that depends on your loan provider. We withdrew on our previous mortgage (ie for our existing house) for the land so were paying interest and principal. Obviously this wont apply if you are a first home buyer. We then took out another loan for construction and amalgamated previous loan into that, and had usual progress payments, same as if we were building on our own land. With our credit union, construction loans are interest only but you can pay additional amounts off the principal if you want to - which we did. The other type of house land package is known as a Turnkey package (in SA terminology anyway), in these you do not pay anything, except possibly a small deposit, until handover. ie the house is built 'on spec'. Usually with these you have less option to change things, especially structural things; you may be able to pick colour scheme, kitchen choices etc - all house/land packages vary in their conditions and inclusions. Re: Home Loan Ignorance - Land & House 11Mar 26, 2009 6:11 pm Hi there, It would have been better if you posted this in the Home Finance section as I don't always visit this section. Mikenrochelle the construction loan is a separate entity that I start repaying once Handover is complete. This is wrong! you start repaying the construction loan as your progress payments are made by the bank. The posts so far have given a good variety of options as well. One thing is constant; if you buy land and settle it first, your interest repayments on the land and the construction loan will be substantial while you are still paying rent. Re: Home Loan Ignorance - Land & House 12Apr 05, 2009 10:42 am We are with CBA our land settled last year so we have a loan for that of which we are paying intrest and principle. We have now applied for a construction loan of which has been conditionally approved and we will pay intrest only on that one whilst the house gets built. As thlo said you will be paying intrest and it will go up each time there has been a payment made therefore a draw down on your mortgage. The reason we chose to go with 2 loans is the bank wanted to charge us LMI again on the full cost of the land plus the amount for the house as we wouldn't make it under the 80%. They said due to the economy they are not transferring LMI which we have already paid on the land so we are happy running 2 loans! 2nd build here we come in Whittlesea! https://forum.homeone.com.au/viewtopic.php?f=31&t=92617 1st Build - Henley - Cooper in Doreen! (2009) https://forum.homeone.com.au/viewtopic.php?f=31&t=17354 The biggest challenge will be if you take out a loan and then run out of money - you'll have an incomplete security and lenders do not like this so you can get stuck.… 2 19112 Hi, you've probably already resolved this, however, Commbank will probably pay the funds to you after you send evidence the work is done regardless the change in the quotes. 1 35330 How much are you ahead in payments compared to where the build is at? Have you fully drawn down the loan? 5 11933 |