Browse Forums Home Finance Re: Deposit on Land . . . does it count?? 5Feb 25, 2010 5:28 pm Trent Davidson Property Finance Consultant Residential Lending LJ Hooker Finance Brisbane North Credit Representative Number: 387283 under Australian Credit Licence:380270 Re: Deposit on Land . . . does it count?? 7Mar 12, 2010 12:00 pm Hello Lakie, They will look at it much the same either way. If you have land of $100k value and you have used a $50k deposit. Your lend is $50k only thus a 50% LVR. If you then build on that for $100k. Your lending at the lend is the $50k for land plus the $100k for building. Total of $150k secured against the land and build cost ($200k total). End LVR is 75% (ignoring fees for ease of figures). Alternately, you could buy land for $100k only use $20k deposit (avoid Mortgage Insurance). This is an 80% LVR and you have $30k in your pocket still. You then build for $100k but then you can put $30k into the build yourself meaning lending is only $70k. End result is $80k lending for land and $70k lending for the build. Total loan $150k end LVR 75%. Thus in the banks eyes much the same risk level overall. It is smart however to use the smaller deposit (scenario 2 above) as this will leave you 'cash' funds to cover the required deposits for the builder which can be anywhere up to 10% plus costs for surveying or engineering, planners etc. So to answer your question Lakie. You can plow a larger amount into the land loan. However, you will either need to draw some of those funds back out for deposits (if redraw is available) or you will need to do a topup/increase to your loan against your land value to cover deposits. There is No right or wrong answer here. Just what will suit your requirements and specific circumstances. What is BEST PRACTICE though. Is to have the ENTIRE structure put together in the one finance recommendation/proposal. So that it involves both stages of lending (land and construciton) even if they are done seperately and months apart. This will give a better overview of costs/fees/deposits that need to be accounted for. Regards, Trent Davidson Property Finance Consultant Residential Lending LJ Hooker Finance Brisbane North Credit Representative Number: 387283 under Australian Credit Licence:380270 In NSW the maximum deposit for building work is 5% until the builder provides HBCF insurance 1 4814 I've just built 3 stairs off a landing out the back and been told by the private certifier I need hand rails sorry tried to attach a pic but couldn't mine don't have sides… 5 5705 i had the my concreters concrete right up to the fence. I have pits all along my path, so the water tends to drain away from the house and into the pits. There's only one… 7 12718 |