Hi all,
Been reading through alot of the valuable info available on this forum but thought i'd sign up so I could ask a couple of questions specific to my current situation;
We are looking at a vacant block of land in an established stockland owned estate (estate is about 5 years old now). I am reasonably confident the price I think I can get the block for is fair in todays market (assuming say 5% discount).
We would likely be sitting on the land for 12 months before building, I am mentally prepared for the land price to possibly drop in that time and we already have pre approval from our bank to purchase the block.
My question is that if we went ahead and bought the block, when the time comes to apply for a construction loan in 12 months I have been told the bank does a valuation on the projected completed house and what the bank thinks it could sell for in the market at the time, and that this amount is very, very conservative. This could mean a nasty surprise when we already have the block we like, but have to fork out tens of thousands of $$$ extra as the bank low balls the valuation...others have said its fine the banks will generally loan you the full cost of construction (to the max LVR and less any deposits of course) based on current land valuation + fixed price contract cost of construction. We do currently have some equity in our current home, but not a massive amount but I don't really want to draw on that if possible as I was hoping to keep it and rent it out (approx 15%/ $45,000).
The block has a decent slope, and hence the construction cost may seem high but will not "add value" to the finished property.
Also, the standard contract states we have to commence building on the block within 18 months. In the event that something happened and we could not afford to build in that time (ie: one of us became unemployed, disabled etc..) the contract does not specifiy how they enforce this?? How can they make you build something if your circumstances changed so much and you were unable to fund the construction?
Sorry for all the info! I really hope someone can help answer these.