about two years ago i purchased a vacant block of land. to obtain finance for this i approached a mortgage broker who did a good job in securing one of the major banks to facilitate the purchase. i have been paying down the loan and i am approx 20k ahead in advance payments.
i now wish to build on my land. i approached the bank directly on this occasion (with consent from the bank and the mortgage broker) and requested finance to build a house. the bank lender told me i had to get a signed contract from a builder in order for the bank to go ahead with the loan. i had obtained pre approval and had my plans drawn up and engineered.
i was also told by the bank lender that the house had to be completed. that is: it had to be a "finished house".
the process of obtaining a signed contract was very difficult for me as i work in remote localities and i am away from my home town for long periods. despite this, i eventually got the signed contract and submitted this to the bank. the bank then sent out their "independent" valuer to asses the property and house.
subsequently the loan did not progress as the bank declined to finance on the basis the house i proposed was over capitalising. this is despite the fact that i had pre approval, and my borrowing capacity is in excess of what i would have borrowed to build.
i have since returned home after completing my contract and personally visited the bank lender last week. i was informed the proposed house would constitute over capitalisation and this would mean the bank would not carry the risk if my property was ever sold! (no thanks to the bank for a vote of confidence). i am not building for investment purposes. i am building because i want to live in my house. incidentally, i am a lenders dream in terms of income, no other debt, no dependents etc and i am able to apply for the FHOG.
at the meeting, i proposed the idea of building my house smaller (it was designed to allow this possibility: build two of the three sections). this 'cut down' version would by my way of thinking, allow me to reduce the amount i needed/want to borrow and thereby reducing the repayment amounts and consequently the bank's risk.
i asked the bank lender to speak with the valuer to garner his thoughts on the matter.
the email reply i received is in my opinion, both obnoxious and distasteful. it smacks of bias in terms of the overall construction of the house. this bias is what i understand to be the real crux of the issue. i have chosen to go for a steel frame house. not a kit home but rather, a one off designed house built with steel framing over an elevated sub floor. it meets all regulations and is universally appealing. it is modest in many respects but when completed it will be yet another example of the growing trend to build to this style both in outward appearance and construction materials and method. in short, its modern and funky!
at the meeting and again in the email the bank lender suggested i would be overcapitalising no matter how much i reduced the house by. i was also directed to approach other builders and obtain quotes for construction in other materials! suffice to say, brick and cement block is what was being referred to.
my question is this: how can i get past this overcapitalising issue with my current bank? i am not changing my house design or construction method. perhaps other lenders are not so hung up on construction materials?