Browse Forums Home Finance 1 Apr 05, 2010 7:01 pm Hi All, Has anyone done this... and how does it work im so confused.. Say for example you bought land for $330k in say 2 years you valued your land from a Property valuer not a real estate and it came back at 370k. In that time you reduced your princple to 170k for example.. Question 1.) Does that mean the banks would consider the difference as kind of like a cash deposit. And if you wanted to build a house.. and you estimate the total cost of the build to equal 350k ( for example) Does that mean your combined Principal on the loan is. 170( the amount u have got remainding on the loan - 40 ( valued extra) +350 (the cost of the build ) = 480k ? http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home Re: Confused about using Land Equity on a Construction Loan? 2Apr 05, 2010 9:04 pm I don't think they will consider it as cash deposit, however I will watch this thread for a more complete answer. I bought land and had to wait for almost a year for it to be titled. by the time we started building, we had about 30000 in land equity, nothing changed in the figures we had to borrow. Though the bank was very happy to lend to us since the LVR had significantly changed. VICTORY 1800, EN-SUITE, DOUBLE GARAGE, FAMILY ROOM AND ALFRESCO Land Settled: 20 July 2010 Site Scrap: 30 August 2010 Slab Pour: 20 September 2010 Frame Complete: 23 September 2010 Fascia and Gutters: 28 September 2010 Roof Complete: 06 October 2010 Lock-up complete: 28 October 2010 Plaster complete: 29 October 2010 Fix-out complete: 22 Nov 2010 PCI 7 FEBRUARY 2011 Re: Confused about using Land Equity on a Construction Loan? 3Apr 05, 2010 10:52 pm we borrowed part of the house cost based on the equity in our land which we had purchased outright. At the time we intended to redo an new equity loan once the house was finished to do all the things you need to get done after building. Instead however as we were able to get a very good interest rate we've been reluctant to renegotiate our equity loan. So we are now slowly saving and getting things done a bit at a time. we were able to borrow up to it think 80% of the value of our block for a loan. You would only be able to borrow a percentage of the amount you've got in equity not the full amount. How much of a percentage would depend on what banks allow now and where you are. banks can waver this. i.e. for loans not in the city banks usually allow a smaller percentage of the equity but when we borrowed there were not many people borrowing so we were able to negotiate this up to a higher percentage. Re: Confused about using Land Equity on a Construction Loan? 4Apr 09, 2010 12:11 am Different lenders use different percentages as to what they will refinance up to. Depending where the land is situated depends what that percentage is. Normally, if you have a loan of $170k and the value of the land is $370k, then you have equity of $200k. It doesn't really matter about your purchase price anymore. However, not all of this is available equity. As above, banks usually only lend up to 90% of the value of your property. In this case, 90% of $370k = $333k. you owe $170 therefore available is $333k - $170k = $163k. Unfortunately with most lenders, this would also attract mortgage insurance..... Yes you can use this available equity as a type of cash deposit....in a matter of fact you can take it out as cash however the most is normally up to 80% depending on the lender. If building was going to cost $350k, yes you could use this. Loan would be $350k + $170 (already there) = $520k. Value would be $350 (construction) + $370 (land) = $720k. This is how most first time investors start in the market, using the equity to cover the costs and 20% deposit for their first investment. The best way is to use 2 different lenders when doing this however as it saves a lot of headaches latter on. Re: Confused about using Land Equity on a Construction Loan? 5Apr 13, 2010 1:38 pm thx http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home 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 13508 If this is a custom build then I would expect the builder to set out the door frame closer to the wall to avoid the gap between architrave and the wall and or specify… 9 6282 Broker here - legislation says that every true broker must put the clients best interests before theirs so in theory they must offer you the best options for you on their… 2 43736 |