Browse Forums Home Finance 1 May 15, 2017 11:53 am Hi Guys, 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) or 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 Loan 2May 15, 2017 1:21 pm Hi Usam, 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. Cheers, Tom Re: Land and Construction Loan 4May 18, 2017 3:11 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. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Land and Construction Loan 6Nov 21, 2019 8:23 pm MrSandman That's interesting. I want to buy land too, and I'm looking for a loan right now. How did your story end? Did you end construction and other stuff? And one more thing - where did you get a loan? One of my friends shared with me this link https://credit-10.com/za/konga-loans/. proposal from that company looks good, but I don't know, if there won't be any problems. I've heard, that some companies can raise rates by the time, or refuse to recount loan, if something goes wrong. Do you know something about that? Erm, that’s not Aussie, are you looking in Australia? Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building 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 19367 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 35548 Thanks very much! And would the landscaper/contractor generally involve the engineer or is that something the client would do? Thanks for your help 2 10124 |