May 15, 2017 12:53 pm
I put 10% deposit on land and it seems to be ready in couple of weeks. I will sign my building contract after the settlement of land (end of June). I have a 20% deposit for the construction loan.
1) is there any benefit to settle land with 10% deposit with LMI and then construction loan without LMI.(or are they calculate LMI on total LVR)
2) Land with 20% deposit and 10% deposit with building.
For total LVR I have 12% deposit.
Any suggestion highly appreciate.
Re: Land and Construction Loan2
May 15, 2017 2:21 pm
1) Even though you have 20% for construction, the lender will first charge you LMI at land stage and then be charging you extra LMI at the construction loan as they will then be calculating it on the total LVR.
2) My opinion is this would be the preferred option, because if you don't apply for the construction loan at the same time as the land loan, then a lot of lenders will add the capitalised LMI to the new total overall loan including construction at the later time. This would mean that your LVR is in fact bigger and will mean more LMI to be paid at construction.
Example - You buy land at $250,000 and put 10% deposit of $25,000 meaning base land loan of $225,000. LMI of say $5K capped onto the loan gives total loan of $230,000. If construction loan happens later, the lender will use $230,000 as the loan amount for LVR purposes and not $225,000.
By paying 20% at land stage and 10% at construction, you wont have the above issue (note as mentioned this is only if you don't do both land and construction loans at the same time, otherwise its a different scenario).
Now there is also funds required for stamp duty, miscellaneous costs, overruns to be factored in which I hope you have done.
Phoenix Loan Consulting
www.phoenixloans.com.au | Ph: 0409 799 372
Re: Land and Construction Loan4
May 18, 2017 4:11 pm
Plus, further to Tom's accurate response it gives you options should the (very unlikely) occurrence of having to change lenders between land and build if something crops up like a bad valuation or a change in your situation.
Additionally, if the build is delayed for whatever reason you would benefit from the reduced overall percentage borrowed in lower LMI. In an off the plan scenario its not impossible the growth in the land could cover the deposit and the whole lot be under 80% and no LMI at all! I am seeing that in Sydney.
Property crazy expert mortgage broker, love building new homes!
Two Red Shoes mortgage broker
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