Browse Forums Building A New House 1 Jul 28, 2009 11:36 pm Hello everybody, I just wanted to know if any of you had very little or no deposit for the construction of your home. My husband and I bought our block over a year ago and with all I've been reading about land valuations from the banks coming in low and 95% lending becoming increasingly rare, I am getting awfully worried about whether or not we are going to be able to build. One would think that seeing as we bought our land over 12 months ago, it's hardly likely that the bank could possibly value it at a price lower than what we bought it - but hey, these are banks and I guess they can do exactly as they please. Over the last 12 months, we have found it difficult to save 10% of the construction amount - the reality is we only have about 3%. The bottom line is if our land valuation comes back low, and the bank will only give us 90%, then we are royally f***ed! Please could someone tell me something I don't know (hopefully something nice and sweet)... Re: Deposit for construction loan - worrying myself sick!!! 2Jul 28, 2009 11:45 pm hi tanaka the bank will also need to value your construction loan - before you make any moves towards building i would get the bank to do a val on the land (hopefully you may have some equity and be able to work around your small deposit) once they have done the val it will give you a much better idea of where you stand and your lender can explain your options etc - especially as a lot of the lenders have changed their policies recently i would be getting as much info about you banks new policies as you can so that you are prepared for anything they may say...are you waiting on a valuation now or just starting to think about building? also, here is a link to the page on my thread where I have listed how CBA worked out how much deposit I would require - all the calcs are about half way down the page...once you have a construction contract generally they will value the land and construction together and lend 95% of that valuation...hope this helps viewtopic.php?f=31&t=15399&start=340 2014 - Prepping to build the Soho 4 with Plantation homes, industrial style 2009 - Built the Brampton with Coral Homes viewtopic.php?f=31&t=15399&start=280 Re: Deposit for construction loan - worrying myself sick!!! 3Jul 28, 2009 11:55 pm tanaka we all worry about low vals, but it is greatly influenced by where you are building. Most low vals have been coming in on the outer burbs. Suburbs closer to the city appear to not be affected. Where are you building? A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Deposit for construction loan - worrying myself sick!!! 4Jul 29, 2009 12:12 am Jess09 hi tanaka the bank will also need to value your construction loan - before you make any moves towards building i would get the bank to do a val on the land (hopefully you may have some equity and be able to work around your small deposit) once they have done the val it will give you a much better idea of where you stand and your lender can explain your options etc - especially as a lot of the lenders have changed their policies recently i would be getting as much info about you banks new policies as you can so that you are prepared for anything they may say...are you waiting on a valuation now or just starting to think about building? also, here is a link to the page on my thread where I have listed how CBA worked out how much deposit I would require - all the calcs are about half way down the page...once you have a construction contract generally they will value the land and construction together and lend 95% of that valuation...hope this helps viewtopic.php?f=31&t=15399&start=340 Thank you so much for replying Jess. I actually saw your calculations a couple of hours ago, so I have a basic understanding as to how the banks come up with how much deposit is needed. We aren't waiting for a valuation - we are waiting for the tender from our builder. I am going to pick my broker's brains tomorrow, because I am getting so worried. I can actually feel myself getting sick.. I'll keep you posted. Re: Deposit for construction loan - worrying myself sick!!! 5Jul 29, 2009 12:14 am Annietom tanaka we all worry about low vals, but it is greatly influenced by where you are building. Most low vals have been coming in on the outer burbs. Suburbs closer to the city appear to not be affected. Where are you building? Annietom, we are building in Mernda Villages, Mernda - which is definitely in the outer burbs. Like I said, I hope the fact that we bought our land over a year ago will be an advantage to us. I'll keep you posted. Re: Deposit for construction loan - worrying myself sick!!! 6Jul 29, 2009 12:22 am tanaka1 Annietom tanaka we all worry about low vals, but it is greatly influenced by where you are building. Most low vals have been coming in on the outer burbs. Suburbs closer to the city appear to not be affected. Where are you building? Annietom, we are building in Mernda Villages, Mernda - which is definitely in the outer burbs. Like I said, I hope the fact that we bought our land over a year ago will be an advantage to us. I'll keep you posted. yes it will be better for you, also I haven't heard of anyone coming in low vals in Mernda, so that's a positive for you too! Some burbs get quite a few low vals... not usually yours tho! A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Deposit for construction loan - worrying myself sick!!! 7Jul 29, 2009 11:22 am We are building in Mernda Villages also and our land according to our rates has gone up 20k in the last 18 months. Don't know if council over evaluate (prob do to get more money) but I think you should be right. Re: Deposit for construction loan - worrying myself sick!!! 8Jul 29, 2009 4:03 pm We bought our land 5 months ago or something, and our valuation was fine at MV too Custom European Cabinets - Melbourne Kitchen Specialist PM for business details as website currently being updated! Our Crazy Owner Builder Journey! Re: Deposit for construction loan - worrying myself sick!!! 9Jul 29, 2009 4:17 pm Hi there, I am certainly no expert on this matter.. but my understanding is, it is better to get your house and land valued together as they value it higher (so you should get your contract drawn up for the bank first, before approaching them for a valuation) *please correct me if i am wrong here* Anyway I am sure your broker can help you better understand. Why not give him a call.. I am sure he wont mind, since you are so worked up about it.. My concern is.. if you are unable to save much for a deposit.. will you be able to afford the repayments, insurance, rates etc... what if the interest rates go up? -Sha Re: Deposit for construction loan - worrying myself sick!!! 10Jul 29, 2009 4:57 pm Quote: I am certainly no expert on this matter.. but my understanding is, it is better to get your house and land valued together as they value it higher (so you should get your contract drawn up for the bank first, before approaching them for a valuation) *please correct me if i am wrong here* I had the opposite. Land was valued fine at land purchase and then slightly less for when it was total house and land together. Quote: My concern is.. if you are unable to save much for a deposit.. will you be able to afford the repayments, insurance, rates etc... what if the interest rates go up? If you were paying a land mortgage and rent, it would be very similar to full mortgage? Re: Deposit for construction loan - worrying myself sick!!! 11Jul 29, 2009 7:10 pm Sierra Quote: Quote: My concern is.. if you are unable to save much for a deposit.. will you be able to afford the repayments, insurance, rates etc... what if the interest rates go up? If you were paying a land mortgage and rent, it would be very similar to full mortgage? We are currently paying for the mortgage for the land and rent, as well as insurance, so we are very confident that we will have no difficulty in paying the full mortgage. As a matter of fact, the land mortgage and the rent that we are currently paying actually comes up to more than we will be paying when we have left this crappy little rental of ours and are paying the full mortgage! Anyway, I have left a message for my broker to contact me, but I'm going to stop stressing about it. It's out of my hands so whatever happens, happens. Worrying and fretting certainly isn't going to help, so I'll just cross my fingers and patiently wait to hear what the bank says. Re: Deposit for construction loan - worrying myself sick!!! 13Jul 29, 2009 7:21 pm Maybe you should check with your builder about what sort of deposit you had to put down. We had to put down a 3% deposit at our tender appointment and a 2% deposit (to make a total of 5%) at our contract appointment. At the time we were worried we wouldn't quite get there as our land had just settled and we paid all of our stamp duty and lmi out of our savings. We asked if the bank would be able to help us with the deposit required and we were told no borrow money from family if you cant pay the deposit. Luckily we knuckled down and were able to pay the 5% deposit. I know our builder would not order the work drawings without the full 5% Building Sandhurst 36 Porter Davis Currently Fixing Re: Deposit for construction loan - worrying myself sick!!! 14Jul 29, 2009 7:36 pm If you use the advertised PD broker they only require $2.5k deposit, not the full 5%. This is for lifestyle PD, not sure about the others but assume it is the same.. 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 19068 In NSW the maximum deposit for building work is 5% until the builder provides HBCF insurance 1 4814 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 35305 |