Browse Forums Home Finance 1 Sep 04, 2015 11:47 am HI All, I'm sure this might have been asked before, but I couldn't find exactly our situation to answer it, so here goes: We brought our block in 2013 at $300,000. Six months later, the block next door, exactly the same size, shape, contour etc, was sold at $350,000. Just last month 6 more blocks, of the same size and similar shape have been put on the market at $375,000 with one under offer and titles due in December this year. We have been shopping around builders and have decided on Red Ink, but have yet to pay our $3000 deposit to them to firm up quotes. Their estimates range from $270-370,000 for house, depending on the inclusions etc (400sqm house, 4x3, 31 course ceilings etc). What we want to know is this - what sort of cash deposit do we need to build? Is the equity enough in our property to progress with building without needing a cash deposit besides what we pay to the builder to begin? And how will the bank determine how much we can borrow? And the value of the entire land and house? Thanks, Em. Re: Construction Loan Questions 2Sep 04, 2015 12:20 pm Hi Em The valuer will use the recent sales - settled sales - of similar blocks, but it depends on what you owe on the land as to if there's enough equity to fund the build. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Construction Loan Questions 3Sep 04, 2015 12:21 pm becjarrettdalton Hi Em The valuer will use the recent sales - settled sales - of similar blocks, but it depends on what you owe on the land as to if there's enough equity to fund the build. Thanks Bec. We owe $270,000 on the vacant land currently. Re: Construction Loan Questions 4Sep 04, 2015 12:27 pm So, you want to borrow $270,000 for the build on top of the $270,000 already owed = $540,000 on estimated valuation of ($370,000 for the block + $270,000 for the build) $640,000 = 84%, not impossible (subject to approval of course!) but if you can get it under 80% with cash you'll save just a few thousand in mortgage insurance. You can also bump up the valuation with quotes for finishing items that you will do from your cash. OR, if the build comes in top of the range you want to borrow $370,000 for the build on top of the $270,000 already owed = $640,000 on estimated valuation of ($370,000 for the block + $370,000 for the build) $740,000 = 87%, not impossible also (subject to approval of course!). Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Construction Loan Questions 5Sep 04, 2015 12:29 pm becjarrettdalton So, you want to borrow $270,000 for the build on top of the $270,000 already owed = $540,000 on estimated valuation of ($370,000 for the block + $270,000 for the build) $640,000 = 84%, not impossible (subject to approval of course!) but if you can get it under 80% with cash you'll save just a few thousand in mortgage insurance. You can also bump up the valuation with quotes for finishing items that you will do from your cash. OR, if the build comes in top of the range you want to borrow $370,000 for the build on top of the $270,000 already owed = $640,000 on estimated valuation of ($370,000 for the block + $370,000 for the build) $740,000 = 87%, not impossible also (subject to approval of course!). Thanks again Bec! And am I right in understanding that if we do go over 80% and have to pay LMI, the LMI we've already paid on the land loan ($7800) will be offset against anything we might need to pay on the construction loan? Re: Construction Loan Questions 6Sep 04, 2015 12:31 pm Typically, yep. They do a calculation of the new premium and deduct what you've already paid. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Construction Loan Questions 7Sep 04, 2015 12:33 pm FamilyofFive becjarrettdalton So, you want to borrow $270,000 for the build on top of the $270,000 already owed = $540,000 on estimated valuation of ($370,000 for the block + $270,000 for the build) $640,000 = 84%, not impossible (subject to approval of course!) but if you can get it under 80% with cash you'll save just a few thousand in mortgage insurance. You can also bump up the valuation with quotes for finishing items that you will do from your cash. OR, if the build comes in top of the range you want to borrow $370,000 for the build on top of the $270,000 already owed = $640,000 on estimated valuation of ($370,000 for the block + $370,000 for the build) $740,000 = 87%, not impossible also (subject to approval of course!). Thanks again Bec! And am I right in understanding that if we do go over 80% and have to pay LMI, the LMI we've already paid on the land loan ($7800) will be offset against anything we might need to pay on the construction loan? Another questions - can we get pre-approval now and spend the next 6 months saving some cash to help offset any possible need for LMI? - We are expecting to take our time with the builders to finalize contracts so we might have a bit more than the average time up our sleeves. Re: Construction Loan Questions 8Sep 04, 2015 12:36 pm You can, but, it will be subject to the contract and whatever the valuation comes back at at that time - so yes get pre approval to confirm your limits, but its a completely new ball game when you have it finalised. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Construction Loan Questions 9Sep 05, 2015 11:56 am Some times valuer gives low valuation in new estates because of the other old properties in that area which may sold for less of the same block size.. But it doesn't apply technically to a new house comparison !! In my case I have been given 40k low valuation .. Basically if I build a house with minimal upgrades considering base home price,BAL and developer req. that it self goes over the price bank valued to the block.. Just heads up Re: Construction Loan Questions 10Sep 06, 2015 1:34 pm If you hurryy things along with your builder is your apply with Westpac they're still doing their extended 85% lvr no lmi deal by 5 Oct. You have to settle by 31 Dec however. You'd then need only 85% to skip lmi so your chances of raising any short fall is slimmer than 80% To poster above, you can provide empirical sales data to your valuer to support your claim supposedlyand therefore avoid the issues you described. The biggest challenge will be if you take out a loan and then run out of money - you'll have an incomplete security and lenders do not like this so you can get stuck.… 2 19114 Hi, you've probably already resolved this, however, Commbank will probably pay the funds to you after you send evidence the work is done regardless the change in the quotes. 1 35332 How much are you ahead in payments compared to where the build is at? Have you fully drawn down the loan? 5 11933 |