Browse Forums Home Finance 1 Aug 15, 2014 3:38 am Hi, I bought land in May this year and I put 20% deposit down on the loan. I have to have construction done in 3 years. (Gives me time to save money for the deposit on construction). Now for example. Say, Land was 250 000 .... and i had 20% ... so loan amount was 200 000 I start paying principal + interest monthly .. I pay the minimum monthly. All spare money I put into my offset account. now lets say next that next year August I want to meet with builders and the house/construction will be 250 000 Trying to avoid LMI... do I need 50 000 deposit (20% of 250 000).??? Additional things to consider - by Aug next year.. the Principal on the land would have been reduced (as i have paid land during this time). - When land was bought, there was not many houses in the area/estate ... there is now a few completed, some shops are going to open soon and a school. So the land value will increase.. How do I calculate the deposit needed to avoid LMI? Re: Land first then construction - confusing calculation. 2Aug 15, 2014 2:31 pm When going for construction finance you will need to provide minimum of 20% on the lesser of the contract price or the bank's valuation of the house and land together. Example.
Building in Brisbane with Vernal-Corner & Buchanan https://forum.homeone.com.au/viewtopic.php?f=31&t=73636 Re: Land first then construction - confusing calculation. 3Aug 16, 2014 2:42 am As mitchitygrub said, it all depends on what they value the complete house and land at. You might get lucky if the land value increases enough in that time, that you might not need a deposit or a minimal one to avoid LMI. Cheers Tom Re: Land first then construction - confusing calculation. 4Aug 18, 2014 4:52 pm Ok, not sure I get it fully yet.. but I think Ill manage.. Just saying, if the land value goes up by 10k.. guessing that 10k is equity and will count towards deposit. Re: Land first then construction - confusing calculation. 5Aug 19, 2014 8:57 pm Basically, yes. The land should have increased in value so that will be equity. The bank will do a valuation of the completed property though, hopefully that will be equal to what you are spending on the house plus the new value on the land but it may not be. You'll be able to borrow 80% of this value without LMI. Re: Land first then construction - confusing calculation. 6Aug 20, 2014 10:27 pm The only variable will depend on your total "as if complete" valuation come construction time. So if you can retain the 20% equity in the land, and if the construction valuation stacks up, then you have no problems. Also, to mitigate this by continuing to reduce your balance on your land you'll negate the risk of losing your 20% equity so you can avoid LMI. Re: Land first then construction - confusing calculation. 7Aug 26, 2014 1:00 pm jb_money The only variable will depend on your total "as if complete" valuation come construction time. So if you can retain the 20% equity in the land, and if the construction valuation stacks up, then you have no problems. Also, to mitigate this by continuing to reduce your balance on your land you'll negate the risk of losing your 20% equity so you can avoid LMI. The only way I will loose equity is if the land value comes down? 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 4422 Yes you are correct, unless there are outside works which form part of the contract such as landscaping or driveways, and importantly, the work delayed is on the critical… 1 2557 Can someone please offer some advice? Im DESPERATE. Because I'm completely and utterly exhausted. How long are variations taking with other companies at the moment? We… 0 12003 |