Aug 24, 2017 3:51 pm
just a quick question regarding loan for untitled block of land works.
I assume there is no loan or repayments until the block is titled which can be close to 12 months.
When the bank assess your loan do they count the rent you're Currently paying ?
Do they base it on full repayment or interest only if you plan on building not long after it has been titled?
Re: Land loan2
Aug 24, 2017 3:55 pm
You only pay repayments once you have borrowed money, so, if you have borrowed money (from elsewhere) for the deposit you would have repayments on that money, but, yes - the land loan doesnt commence until the blocks are registered and the land settles.
The next answer is a little more tricky - it depends on the lender and on the timing, so, if you're going to hold the land alone for a bit (because of delay in building) then they will assess the land loan with your rent payment included - but not the final build loan (if you're building a home for you to live in). This can also depend on how your loan is applied for, as a house and land together or as land separately and then build.
And again, the final answer comes down to timing - but note that assessing for interest only is actually harder than for P&I
Re: Land loan3
Aug 24, 2017 4:02 pm
Thanks, so it would be easier in a way to apply for a house and land package then so rent won't be included in the sums??
One other thing, if you have done the sums and used a few borrowing power calculators to see how much you can be borrow for a house and land package and it comes in a tad short, but I'll have over 12 months or so before the land titles to have saved the shortfall does that count? If that makes any sense lol.
Re: Land loan4
Aug 24, 2017 4:05 pm
It makes sense but those calculators are not very good..l. I'm just gonna say, you don't pay to see a broker, go let them do their thing for you
The Q about the loan structure actually comes down to timing, you have to have a full approval to settle on the land, and, you cant get full approval without a completed build contract. SO if your land is ready before your builder is you're in grief with one loan application- hence why we do two, full approval for land and pre approval for build. Make sense?
Re: Land loan6
Aug 28, 2017 3:55 pm
One last question lol
If you buy land first and settle on that block, then start visiting volume builders and getting a contract draw up, you'd obviously apply for a construction loan, what happens with the current land loan?
Do they then count your current rent, land loan to get serviceability amount for the construction loan?
Re: Land loan7
Aug 28, 2017 5:39 pm
Depends on the lender again... you can apply for a new loan with that lender and absorb the old loan into it. Or if you prefer to keep them separate then yes they will re-assess including your land loan. Definitely not rent if you are presenting as an owner occupied home.
Re: Land loan8
Aug 29, 2017 12:58 pm
As Bec mentioned, rent won't be needed to be taken into account if you are constructing for your owner occupied residence.
The land loan regardless of whether it's left as is or internally refinanced will be taken into account for servicing.
The other thing you might have to worry about is LMI on the land loan if you have it capped. Most lenders will then include that capped LMI component when calculating LVR for the combined land + construction value if you do them separately like you are proposing to.
Phoenix Loan Consulting
www.phoenixloans.com.au | Ph: 0409 799 372
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