Browse Forums Home Finance 1 Jan 19, 2013 6:59 pm Been reading everything here but still need advice on the best way to go about this! We have 150k in our current loan remaining, and our house (living in) was recently valued at 340k. We would like to purchase land at $240k, then once all that is finalised, build a house, approx 240k again. Once the new one is complete and ready to move into, we'll put our house on the market, and transfer the equity into the new loan to reduce the repayments. Do we have to get the separate $240k loans for the house and land, whilst still paying the interest on our existing $150k mortgage? What is the best option to do this? Re: Equity in existing home, buying land and house separatel 2Jan 20, 2013 12:54 am If you're looking at using the equity in your current property, I would suggest you would look at setting up a line of credit on top of the $150K to cover 20% deposit and costs associated (i.e around the $110K mark) with your land and build. Then you can buy your land, use the money from the line of credit as a deposit and take out a new separate loan against the land for 80% LVR, and then do the same for construction. During construction the loan is drawndown in stages to pay the builder so you don't have to pay interest on the full amount from the start. If you want further details on how this part works, PM me and I can send you a guide I have. Once you sell your original house, you can pay off your $150K loan plus the line of credit, and any excess you can place into the new loan or an offset account linked to it. In answer to your question, until you sell your house you will be paying the loan for effectively the $150K mortgage plus the total house and land value. Cheers Tom Re: Equity in existing home, buying land and house separatel 4Jan 27, 2013 11:47 pm Of course you will need to pay the 150k loan as well as the repayments on your new loan. However, I would say that the bank would use both properties as security for the land purchase and you won't have to worry about a line of credit for a deposit. You will e able to borrow up to 80% of the value of your current house plus block without paying lenders mortgage insurance. When you sell your current house, at settlement, a certain amount will have to go back to the bank to ensure your new house loan is not over 80% Re: Equity in existing home, buying land and house separatel 5Feb 08, 2013 7:34 am Managed to do this through a mortgage broker.. PLC gave us some excellent tips for which we are most grateful! We refinanced the existing home loan to enable the 100k in redraw to be freed up and used for deposits for both land and home loans (negating LMI) Used the additional equity of the current home (at market value) to extend our borrowing power. 2 other loans were then created, one for the land, and a construction loan for the house. So essentially, until building is complete, there will be 3 concurrently running loans (all interest only). Fortunately the bank combined the fees and charges for all three. The bank allowed us to stay in our current home by treating it as a rental investment property. We are treated as tenants, but of course only being required to meet the loan repayments. Once the new home is complete, the old home will go on the market and the proceeds will immediately pay off its mortgage. Any gained equity will go into the loan for the new house (hopefully reducing it substantially!) Pros: Get to stay in old house on interest only payments. Managed to use equity to obtain a larger than normal loan. Avoid LMI. Cons: Towards the end of the process, the interest for all 3 loans can be substantial until the house is sold. But it's still far less than having to temporarily move and pay rent. If unable to meet repayments whilst building, there is the possibility of the bank foreclosing on all securities (ie your current home could be sold right from under you!) 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 19882 Yeah I don't know why I came to a forum. Place is full of wierdos/pedos thought internet may help but I suppose I'll try my luck with someone in person. Cheers. I tried… 0 6792 4 11556 |