Browse Forums Home Finance 1 Aug 11, 2011 4:14 pm Hi all, My hubby and I purchased a block of land in April which is due to settle some time this month once titles are available. We have decided on a builder and a plan and have a rough estimate of what the construction will cost (will get a more accurate costing once we have titles and the site survey and soil test can be done). I am very confused about what can and can't be included in the construction loan and my mortgage broker hasn't been of much help (taking days to reply to my emails and then just glossing over the answers). More specifically: - The builder has said to expect $75-$100k in siteworks. After reading posts in the forum from other people who have built in the same area it seems that these costs can be almost halved if you do the siteworks yourself. If we do this, will the bank include the costs to do this in the loan? - We want to put up a rather large shed and were hoping that this could also be included - will the bank look at additional costs such as this? - Several posts I have read indicate that additional prestart costs have to be paid upfront - can this not be included in the total contract price of the house and all financed? - Are there any other costs that we need to consider and save extra for (on top of our 5% deposit)?? Thanks in advance for your help Re: Confused about construction loans 2Aug 11, 2011 6:12 pm 1) The builder gave you an informal estimate of $100K for site cost, in the absence of them doing site survey and soil test???? Wow. You must have a huge slope on your land? The builder can only give you a formal estimate on site costs once they have done a site survey and soil test. To get ideas on what other people have been paying for site cost, see here http://forum.homeone.com.au/viewtopic.php?f=31&t=9017 2) You probably have a Land Loan from XYZBank. You need to obtain a Construction Loan from XYZBank as well. You can't have a Land Loan from XYZBank and have a Construction Loan from ABCBank. Both loans must be from the same lender. 3) You may or may not save money by doing your own site works. If you do your own site works:
If you plan to do cut and fill:
- your excavator knows at what elevation she needs to start excavating from. - your excavator knows what elevation she needs to stop excavating to. - your excavator knows how far off from both sides of the fence she should limit the excavation. - your excavator knows at what angle the land should be levelled off. If the builder does the site works, she takes on all the activities and risks described above, so you may or may not save that much (considering all the headaches associated with being an owner builder). 4) Yes, you can include a lot of the extra costs in your construction loan (e.g. driveway, fencing, flooring, clothesline, aircon, other fixtures). But you probably can't include non-fixtures such as sofa, curtains, 3DTV. 5) When you try to get a Construction Loan, the bank needs to do a valuation on the value of Land + finished house. Scenario:
Since bank will only lend you $45K, you will need to come up with $55K cash to make up the total construction cost. Can somebody validate my calculations???? 6) You will need to pay 5% by the time you sign the building contract. It varies between builders, but it could look like this:
However they proportion it, it must total up to 5% on building contract signing. Yes, the 5% will be part of the construction loan. 7) You're doing owner builder on a proportion of your build, it is hard to get finance, and usually require 20% deposit. 13-08 Moved in 13-05 Build restart 13-04 VMIA compensation 12-08 Builder liquidation 12-03 Fixing 11-12 Lockup 11-11 Frame 11-09 Slab 11-09 Start 11-07 Contract 10-11 2K deposit 10-06 Titled land Re: Confused about construction loans 3Aug 12, 2011 11:40 am Thanks for your reply zeitgeber Our block in pretty much level but all rock and we are 45m from the road so lots of trenching & rockbreaking involved running the electricity and stuff. I am still a little lost about including extras - do these have to be done thru the builder and included in the building contract? I have read several posts where people have paid deposits on things like sheds, air cons etc and then find out that the bank will not include these costs in the mortgage. I have also heard similar things about upgrades made at prestart. Our custom Gemmill Home in Bedfordale WA Build thread:https://forum.homeone.com.au/viewtopic.php?f=31&t=53788 Timeline on page 1 Re: Confused about construction loans 4Aug 12, 2011 5:49 pm Most lenders will not lend where owner builders are involved. Whilst I understand that you are only contemplating certain site works I would suggest that you forget it and try and get a number of quotes from qualified professionals and try and get a better deal. Re: Confused about construction loans 5Aug 12, 2011 7:04 pm We do not actually want to do the sites works ourselves, just don't want to pay the builders margin on top of the costs. So we would liase directly with the siteworkers instead of via the builder - not sure how this makes us "owner-builders" in the banks eyes??? Our custom Gemmill Home in Bedfordale WA Build thread:https://forum.homeone.com.au/viewtopic.php?f=31&t=53788 Timeline on page 1 Re: Confused about construction loans 6Aug 12, 2011 7:40 pm I think if you get the pros to do it and you get formal quotes as to the scope of work to be done and you builder approves the work to be done then the bank should not have any dramas with it. We did that with our construction loan. We borrowed an extra 18K for air cond and a driveway. Re: Confused about construction loans 7Jan 11, 2012 2:42 pm Hi, We have done land (it's titled land) loan before 2 months with a bank. Now we submitted our construction loan and bank saying land value came low. which i have to pay $7000 from my pocket as i am borrowing 95%I checked with similar block at same state now sales office (Clyde North , Salendra Rise)selling for$213,000. but ban valued our same block for $185,000. I can't even believe this. No essment in our block. can you guys please advice me how can i go for refinance.If so how much i will lost. will refinance work for me. Pls help guys. Thanks in Advanced Nicole Nicole1983 Re: Confused about construction loans 8Jan 12, 2012 10:32 pm Nicole1983 Hi, We have done land (it's titled land) loan before 2 months with a bank. Now we submitted our construction loan and bank saying land value came low. which i have to pay $7000 from my pocket as i am borrowing 95%I checked with similar block at same state now sales office (Clyde North , Salendra Rise)selling for$213,000. but ban valued our same block for $185,000. I can't even believe this. No essment in our block. can you guys please advice me how can i go for refinance.If so how much i will lost. will refinance work for me. Pls help guys. Thanks in Advanced Nicole To be honest at 95% - a refinance may help you get the loan; but it will def NOT help you " financially" speaking....as LMI will be payable all over again and this can be very costly! I would say your better off paying the 7k OR get your broker or banker to dispute the valuation, else wait another 3-6 month for new valuation. I would personally dispute the valuation if you reckon you have a solid case, note they look for "sold prices" not listing.. Regards Michael Michael Chan | Australia wide Mortgage Broker Michael@ShapeHomeLoans.com.au | 1300 74 5626 | Fax: 02 8212 8909 http://www.ShapeHomeLoans.com.au Re: Confused about construction loans 9Jan 13, 2012 6:51 pm Hi Nicole You are better to dispute the valuation. The bank may have just done an online valuation which means that they just look at sold prices in your area. However if you are able to get the bank to do a driveby or and on site valuation you might be able to push the valuation up a little. Or you pay the 7K and then once the house is finished go back to the bank and see if they will lend you additional funds once the house is finished. As generally (depending where you live) the property once completed should be worth much more than you paid for it for house and land. Also explain to the bank that the lots selling for lower prices have easements and as yours does not it is worth more. Provide examples and you should be ok. Cheers Re: Confused about construction loans 10Jan 15, 2012 7:54 am soakedblonde We do not actually want to do the sites works ourselves, just don't want to pay the builders margin on top of the costs. So we would liase directly with the siteworkers instead of via the builder - not sure how this makes us "owner-builders" in the banks eyes??? In many ways that is exactly what an owner builder does. The 'builder' for the most part basically organises other trades to do the actual work, though may do some work themselves, but not always. 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 9022 The fastest thing a builder will do is bank your cheque, those systems work perfectly with lightning speed, everything else is slow burn. Just the way it is. 1 9568 How are you doing Ben? Extremely interested in hearing what you are doing or plan to do! 12 15904 |