Browse Forums Home Finance 1 Apr 30, 2013 3:45 pm Hi Everyone A little bit of background: My partner and I are planning on building a home on his block of land. He bought the block 4 years ago (before meeting me), and entered into a 5 year fixed rate loan with one of the big banks. We went and saw the bank back in February to find out whether we would be able to re-finance for a new loan in both of our names which covered the land and the future construction of a house. The bank said yes, all fine, gave us a figure to work with and said go out and find the house you want, get your quotes and come back and see us to apply for the loan. So we have spent the last 2 months going over house plans and different builders, and we finally decided on a plan we love and went back to the bank last Friday. We get halfway through the loan application and the bank man says "Uh oh, hang on, the land loan is fixed until October 2014 so we can't proceed". We were a bit shocked because the same man told us back in February all would be fine. He sent us away and said he had to call the credit department to find out what to do, because there would be big penalties for breaking a fixed loan. So we finally heard back from him today and he said that they could add my name to the current land loan at the fixed rate, and also take out a new loan for the construction of the house in both names. Then at the end of the fixed rate period in October 2014 we could put them together into the one loan if we wished to. He is a very vague person to deal with and I have sent him about 3 emails so far asking questions to which I get 1 or 2 word answers back such as "correct" or "yes that's right", which is a bit unsettling. What I am wanting to know is whether it is standard practice to have seperate land and construction loans against the one title, and does that mean that the interest we will be paying is more than it would be on one loan? We are first home owners so this is all a little daunting for us, especially after he originally told us it would all be smooth sailing back in February. thanks... Re: Seperate loans for land and construction? 2May 02, 2013 11:10 pm This is pretty straight forward - I would look at dealing with someone more competent. The existing loan is the land loan and the second loan would be the construction portion. This would be progressively paid to the builder based on the building contract and of course the progress schedule. What exactly is the issue with ascertain the construction portion? Re: Seperate loans for land and construction? 3May 03, 2013 2:13 pm As Shahin mentions, a land loan and then separate loan for construction is standard. In your case as you are in a fixed rate loan for your land, you don't have much choice if you want to build. Cheers Tom Re: Seperate loans for land and construction? 4May 03, 2013 2:19 pm I agree with the other posts, when you enter into contracts for land and then to build, it is standard to have separate loans. It shouldn't mean you are paying more interest as it is a percentage, so it all ends up the same IYKWIM. It is a bit daunting, but keep asking questions until you get the answers. Our build: viewtopic.php?f=31&t=64705 Re: Seperate loans for land and construction? 5May 16, 2013 2:02 pm We are building our house with 2 x loans, a separate one for the land and a construction one for the house. This is because we originally bought the land with a house on it and demolished. Once our house is completed we will keep the loans separate - our reasoning for this, is that for our land loan we have been paying it off for a few years and we are now paying more principle off our loan than we were 5 years ago. I guess we could refinance but we would be taking our 25 year land loan and our 30 year construction loan and combining it into a 30 year land and construction loan - I guess this would reduce your repayments but you'd pay more interest in the long term. Thanks very much! And would the landscaper/contractor generally involve the engineer or is that something the client would do? Thanks for your help 2 10027 DIY, Home Maintenance & Repair That laser level looks lovely! We bought one for less than a quarter of that price off eBay. It worked really well for us and it's still going now, five years later. After… 1 16711 Hi, My home construction is complete, and the handover is scheduled next week. However the construction has been delayed and I have raised this to the builder. The… 0 5327 |