Browse Forums Home Finance 1 Mar 02, 2010 4:04 pm What comes first, how much can you borrow, or how much do you want to borrow? I'm a bit confused, everytime I ask my mortgage broker how much is on my loan application form, he says you are applying for 90% of the purchase price. This doesn't make sense to me though, because all we have signed for is the block of land. My partner and I are trying to figure out what type of house we want to build, and to do that, we want to know how much we can borrow, or do we just assume we can borrow as much as we like as long as we can make up 10% of it? (which doesn't sound right to me) I suppose we just want to know what the process is, we want to start looking for builders, but it all seems like a waste of time when we don't know how much we can afford... Re: What comes first 2Mar 02, 2010 6:23 pm I think you need to have a better, clearer chat wit your broker. He should be giving you a clear idea of what you're likely to be approved for. Having said that, how much have you got as a deposit? If you're applying for 90%, you could just times your deposit by 10 and assumed thats roughly what you've got to spend. ~W~ Building our forever home - Lilium Estate Clyde - Land due May 2019 Built our first home - Pakenham - 2011 Re: What comes first 3Mar 03, 2010 10:20 am Both can be a "chicken or egg" question; You: "How much can I borrow?" Broker: "How much do you need?" You: "How much can I have?" You can find out indicatively how much you can borrow by using a "Borrowing Power" calculator - most financial institutions have them linked to their websites. This should give you a ballpark figure to work with when choosing a house design. Also use a repayments calculator on the amount and make sure that they're comfortably within your means - both at today's interest rate and + 5%. Also most lenders now insist on no more than 90% LVR - meaning that you need to come up with 10% of the total purchase price of both your land and house as a deposit. Often there's a bit of argey-bargey as you fall in love with a house design, then realise that you don't have enough cash for the deposit, or alternatively the total of house + land will see you mortgaged to the eyeballs, stressed to the hilt and working until 70. Good fun building houses ! Built a Tribeca 44 with the Big M Sales Accept 15/06/09, Contract Signed 24/09/09, Site Start 23/11/09, Slab 11/12/09, Frame 12/01/10, Roof 20/01/10, Lock-up 30/03/10, Fixing 30/04/10, Handover 27/08/10. Re: What comes first 4Mar 04, 2010 2:03 pm MDS. Have another chat to your broker. If they have done the land lending they should of considered that you were trying to build as well. Dont ask them how much you can borrow etc. Ask them how much they could get as a 'preapproval' for you towards construction. This way they can work out how much extra above the land loan that you can borrow. You are right in saying that 90% of whatever seems incorrect. You certainly do have a borrowing limit to what you could look at based on your income and liabilities. It may be just a breakdown in communication with your broker. Ask for your borrowing capacity as you wish to look at your options for construction now. If your broker is unable or unwilling to work with you or make things easier. You could look at talking directly to the bank/institution to do the construction or speak to another broker. Your broker should be working with you to make things easier not against you. Hope this helps. Feel free to reply or pm for further info. Regards, Trent Davidson Property Finance Consultant Residential Lending LJ Hooker Finance Brisbane North Credit Representative Number: 387283 under Australian Credit Licence:380270 Re: What comes first 5Mar 28, 2010 9:12 pm The first thing you need to establish with your broker is what is your maximum borrowing capacity. This is based on your income (and what your income is made up from ie: base salary, overtime, allowances, bonuses etc) and your living expenses (based on marital status, dependants etc) Every bank has a different policy on how much they will lend based on this criteria and it pays to know which banks will lend the most given your situation. This is where your broker can help as the amounts can vary greatly. It is no point having a 10% deposit towards the purchase price if the loan you need for the remaining 90% exceeds your borrowing capacity. From there work out how much you need to spend on the land (including stamp duty and fees) and then look for a building contract up to the maximum of borrowing capacity. Most lenders use standard living expenses based on the number of adults and dependants in a household when calculating maximum borrowing capacity. Everyone however has different lifestyles so it pays to sit down out work out your own personal monthly budget to make sure you can afford your proposed monthly repayments. 11 40698 Thank you. Do I use timber floorboards for stairs or do people use timber treads? Or is both the same? 6 7258 Can anyone give me any onfo on New Homes WA? Good or bad, hopefully good just need to know if my choice was good or not? Thanks ❤️ 0 8933 |