Browse Forums Home Finance 1 Jan 30, 2014 9:08 pm Apologies in advance for stupid questions, I am just starting to research the possibility of doing a knock down/rebuild of our current property. I have just discovered Construction Loans! Essentially, I am trying to determine if we can afford to build our dream home and what it will cost us (high level ball park figures.) Current property - worth close to $600k, land value would be around $400k Current mortgage - $390k Savings - in excess of $100k (very lucky to have just received an inheritance) Let's assume a new build is going to cost $300 - $350k (is that realistic? Just being guided by figures on volume builder sites) I understand the bank will value the property based on 80% of land value plus construction ($320 land value plus $350k construction) Does that then mean we could have access to $670k potentially? (Wouldn't be over capitalising, newly built homes in our area are priced at close to 1million) In which case what happens to the $390k current mortgage that won't have been paid off? Does it just get absorbed into the new loan? (Sounds too good to be true!) I'm sure I am oversimplifying and missing a few steps, so please fill me in! THANKS Re: The grand plan and how to finance it 2Jan 31, 2014 2:32 am The bank will normally value the build as land value plus construction, so using your scenario it will be $400K + $350K = $750K. Without incurring LMI they will allow 80% of that which is $600K. With LMI some lenders may go to 95% if you meet all their criteria so maximum lend will be $712.5K however the LMI figure will be pretty hefty at this LVR. Yes, basically the $390K will be part of the new overall loan once construction finishes. You will need to use some of the savings towards the construction deposit. Also there will be costs associated with drawings, permits, etc that need to be paid to the builder beforehand, and also it would be wise to hold back some funds for contingency costs (a few percent of the construction should do). Cheers Tom Re: The grand plan and how to finance it 4Feb 07, 2014 7:18 pm Not sure if there is a misunderstanding, but the OP would actually only have access to approx $210k of additional funds, i.e. $600k - $390k (being the total debt minus the existing debt) unless they pay for mortgage insurance. With the inheritance, this might be enough, depending on the build costs. Obviously they will also need sufficient income to service that level of debt (possibly while renting somewhere else) Re: The grand plan and how to finance it 5Feb 09, 2014 12:20 pm hello. my wife and i have found a house we love we took the chance to put the offer through and get that accepted based on finance approval. i have a few questions though that no one seems to answer or know of. we are putting down 5% deposit only because we found something out of the blue. this is around $20500. and we will be lucky enough to have our stamp duty covered by a parent as a gift. my question is based on 5% deposit. can mortgage insurance be put in over the top of the finance amount of $411000 and be ok? and can all bank fees be included in the home loan at this point. i earn $70-$80k and my wife earns $50k or so. we have a car loan repayments of around 550 per month. i think our financials sounds doable my stress is just getting the initial loan approval with no upfront fees besides a broker and the stamp duty's in which we can get covered. also we just come back from a honey moon. so my pay has been significatly lower over the course of a month however the over all year still shows i earn respectable enough money do you think this would change a lenders opnion on lending based on this information. hope this doesn't sound to confusing! stressed thinking and trying to work it out. chris. Re: The grand plan and how to finance it 6Feb 09, 2014 12:40 pm Chrisv, it really depends on the lender. Some will only lend up to a maximum of 95% total. Others will lend up to 95% plus allow an extra 2% (so 97% total) for LMI, etc. Others are no doubt different again. I would speak to a mortgage broker who will know what the different lenders do and don't offer - you won't be obliged to go through them but it will at least give you an idea of the different options for your specific circumstances. Just remember that brokers don't usually cover every lender out there. ~ Anne I used to be indecisive but now I'm not quite sure. Eeek - We're embarking on a knockdown rebuild! Click here for our build thread Our blog: kdrhome.wordpress.com Re: The grand plan and how to finance it 7Feb 10, 2014 1:38 am Chrisv, just to add to Slightly Random's post, as mentioned you would need to find a lender suitable to your needs. As your loan will be 95%LVR, the LMI will be substantial and dependent on the lender they may cap it above 95% however there is really only one or two that will do unlimited LMI cap. The majority only allow 2% at best which would mean you would need to partially fund some of it if you went via these. Then you have the issues of if your 5% deposit is genuine savings over 3 months, how good is your employment history, what is the balance of the car loan liability, are there any more? Generally when looking at a 95% loan, the loan application needs to be strong. You have done the right thing by using a subject to finance clause, it allows you to back out of the deal without losing your deposit if you can't happen to obtain finance. Cheers Tom Re: The grand plan and how to finance it 8Feb 10, 2014 7:33 pm chrisv my question is based on 5% deposit. can mortgage insurance be put in over the top of the finance amount of $411000 and be ok? and can all bank fees be included in the home loan at this point. As slightly Random and PLC aka Tom was saying, there are some lenders that do lender 95% and allow to include LMI in total 97%LVR. However it does depend on your overall situation and what type of lender. There are very strict guidelines which will involved your credit file as well. Unfortunately banks will not be able to include all the fees after you have pushed the LVR to 97% to include LMI. However there are some brokers with access to lenders that may be able to go over that threshold by $20,000 which can be used for personal use. you were just referred to get advice from your solicitor. This is a legal matter. Separately, why would you use a buyers agent for a house and land package? 3 42405 Yep, very good point. I’ll do more research and see what figures I get. Thank you! 8 2449 That drawing’s in the old units. The sewer tie is 1.44m deep and 4.5m offset from left boundary however the levels were taken ages ago so the surface level will have… 1 3541 |