Browse Forums Home Finance Re: 100% Construction Loan 2Jul 25, 2008 5:24 pm I wouldn't think that the CBA would do that without secondary security? The bank will also combine the land value and the projected value of the home at completion to ascertain the amount they will then lend you.
If either the land or the building comes in at a lower valuation then that normally would raise a concern that you may be overcapitalising. Best to sit down and discuss your options with your lender - or another company for a second opinion. Re: 100% Construction Loan 3Jul 28, 2008 11:53 am kyton I wouldn't think that the CBA would do that without secondary security? The bank will also combine the land value and the projected value of the home at completion to ascertain the amount they will then lend you. If either the land or the building comes in at a lower valuation then that normally would raise a concern that you may be overcapitalising. Best to sit down and discuss your options with your lender - or another company for a second opinion. Thanks Kyton for the response. For the land, it was valued $15,000 below the selling price, so I have to come up with that amount plus the 5% deposit, stamp duty and other fees when land settlement comes. We decided to build with Simonds and the projected cost for the home will be $220.000. My question is, is it possible to get an additional loan of $220,000 to cover for construction, or will the lender valuate the house lower than $220,000 which would mean that I still have to come up with an additional amount of money to cover the construction loan shortfall? Example, house valuation is just $210,000 (instead of $220,000) which would mean I would have to come up with $10,000. Thanks for your replies. Re: 100% Construction Loan 4Jul 28, 2008 12:21 pm That is possible, especially given the current property market
We are about to start construction ... the contract price for the house is $240,000, but my bank (not CBA) valued it at $220,000 Re: 100% Construction Loan 5Jul 28, 2008 12:29 pm Our land came in on value (with ANZ) and our construction came in 15K under. The house we just sold came in under 20K also, seems like the banks might be getting the right idea and starting to defend against a possible property crisis eg Americas current banking situation. Re: 100% Construction Loan 6Oct 08, 2008 10:35 am Sorry to bring this thread up again!
I've never heard of this before. Are you saying that the Bank actually values your house, even though you're building? So if the house cost $250k to build but the bank valued it and said it's only worth $230k, will they only give you a loan of $230k and you have to pull out $20k from thin air? Wow, this is quite worrying for me. I just thought you ask the bank to borrow what ever amount of money you need and if they say you qualify, then they give you the loan?! Am I wrong in thinking this? Re: 100% Construction Loan 7Oct 10, 2008 12:31 pm Yes, the bank will value your house and land together. For them to decide how much they will lend you, a part of their calculation is your ability to pay the loan, but it's not the only part. They also want to make sure they are not lending you more than the property is worth to protect their investment.
Most home loans are secured loans, secured by the asset. In this case, that's your house and land value. They will not lend you more than the asset is worth, and it's worth whatever their valuer says it is:) CBA told me that during construction they will inspect and do valuations at all the payment stages before handing over the $$ to the builder. In my case, we already own the land, and the loan won't be more than the land alone is worth, so in our case they WILL loan us what we need, but they'll still do a valuation. Greg Re: 100% Construction Loan 8Oct 10, 2008 12:51 pm Once you sign the contract, you should give a copy to the bank who will then organise the valuation.
Westp@c does the valuation soon after i signed the contract, the valuation comes on top of what i spent so it is good My loan is now approved, but they will still do inspection during slab and handover phase, but as far as i know, it won't impact my loan since it is already approved (i hope i am not misunderstood) Blog - http://clageonewhouse.blogspot.com/ Building Thread - viewtopic.php?f=31&t=10886&hilit=milan I am in, with my husband and my beautiful bunny Re: 100% Construction Loan 9Oct 10, 2008 1:15 pm Claego - that is who I was a lending manager with - you are right. The value should be based upon the initial valuation. The bank does a couple extra inspections to make sure that the home is constructed as per contract and that all inclusions are present and accounted for.
Wonderland - the Bank has a duty of care with lending. It has to ensure that the property it is lending against is not inflated unrealistically. At the end of the day if the bank lent too much money against the property then you were to default, they need to sell to recover the debt. Imagine if the property sold (and remember they sell at a "fire sale" - no hanging out for the best price) for a lot less then they were committed to - you then have an unsecured debt to try and cover. Back in the roaring '90's it used to happen quite frequently - especially in boom areas like Southern Queensland / Gold Coast. Developers were in bed with * lenders who overlent against properties which then fell massively in value leaving their owners in precarious positions. Many customers get cranky when bank valuations come in low - but this is to ensure that if something happens that value is the worst case scenario for the property (hopefully!!) Re: 100% Construction Loan 10Oct 10, 2008 1:23 pm Oh I didnt even realise this!!
Thanks everyone for explaing. Now I'm abit worried that I might not get enough money to build the house. Re: 100% Construction Loan 11Oct 10, 2008 1:47 pm Wonderland, just wondering are you buying a house and land package or an established home or land with a view to build? Normally house and land packages are priced realistically - never saw one come in low (unless the developer was throwing in one of those "buy now and we will give you back $5k on settlement" deals - then the valuer will pretty much always value the property at the price less this cashback amount). Established homes can come in lower then the vendor's price - but this is an opportunity to go back and crunch the price lower should the Bank come in with a lower val. If you have land and are then going to build - normally the bank rests on the construction (ie contract value) of the house itself whilst using local sales data to check the value of (a) the land & (b) the fully constructed home.
IE our bank massively under-valued our land - as they first valued the wrong property then decided that since we were well covered with additional security they would rest on a low valuation. Now we are building they will have to ensure that the valuation is done correctly. We are in a unique position in that there is relatively few comparable properties in our area to ours - the only one close was just sold for $1.2m however the land was 1/3 of the size of ours. So will be interesting to see what the valuation comes in at this time. Plus they know that I know how the system works and that they can't pull the wool over my eyes!! Must say - very interesting working for one bank and going to a different institution for a loan!! Re: 100% Construction Loan 12Oct 10, 2008 2:30 pm Thanks Kyton!
$1.2m, that's quite a nice price . We have bought land and am waiting for it to settle in Jun 09 so that we can build a house. As the loan application/approval is only valid for 3 months, we wont be going to the bank until beginning of 09. We're in the process of looking at houses and will probably sign a contract and get everything ready before we go for our loan. We are hoping for a construciton loan, saves double the application fee, and it just seems easier to do everything in one package. Hopefully we dont sign the house contract, only to go to the bank and the bank tells us that our house isnt worth that much and will therefore, short pay us on the loan. We are pretty stretched at the moment, spending as much as we can on extras. I dont know if we are able to folk out more money if the bank's value of the house is less. And since we will have alreaady signed the contract on the house, it would be hard to take things out to make budget. It is very handy that you work at the bank. I've always wanted to work at the bank so i could get a discount off my mortgage, when i have one . The good thing is that you will know all the tricks of the trade. Re: 100% Construction Loan 13Oct 10, 2008 3:37 pm Wonderland even though we bought the land and paid cash for it the builders weren't interested in us getting to the contract stage unless we could prove we had the full amount for the house. Including any finance for the house. Since we intended to borrow approx 35% of the house build costs we had to get our finances sorted before we could get to contract stage. By the time we got to the contract signing stage they'd already seen proof we had the cash + loan to cover the build.
We also had the bind of building in the country. Land here is valued differently and lenders will only led a small % of the value of the land if it is your only surely. I can't remember what percentage now but its not a lot. Our land value came back at 20k below what we paid ( and this was despite us fighting hard to get a good price for our land and paying 15k below the asking price) We actually would have been out by 10 k but because at the time the lenders where struggling to find people borrowing they relented and gave us slightly more borrowing power. Enough to make up the 10k difference. Perhaps we might have had less dramas if we'd been going for a standard mortgage loan but we went for an equity loan. Upshot is if we want to at a future date we will redo the loan and it will be based on the value of the house and land. Re: 100% Construction Loan 14Oct 10, 2008 3:57 pm Kexkez - yep different areas may have different lending criteria. Rural properties / large parcels / areas in small "difficult" places all can affect lending value. From memory rural was sometimes capped at 60% with no possibility of even getting mortgage insurance.
Wonderland - so sorry to disappoint you but most bank's these days don't give out big discounts to staff. They did 19yrs ago when I started - from memory when interest rates for public were at the 12% staff were around 5% - however you had to have been employed for 7yrs and could only borrow 2.5 times your salary value at staff, the rest having to be at public rates (and bank staff are not highly paid!!). Nowadays they tend to let you borrow the maximum amount (ie 95% with mortgage insurance, 80% without mortgage insurance) at a discounted rate which basically anyone can get - ie Westpac's discounted rate for staff is the same for anyone in the public borrowing over $500k on variable rates. They figure that very few people will hang around in a low paying job for 7yrs so offer the discount as soon as you finish your probation period (normally 3mths after starting). Max discount from memory is 0.6% off the public rate. Re: 100% Construction Loan 15Oct 24, 2008 8:26 pm Land got settled recently. I told CBA that I will be building soon and they have ordered a valuation of the Land + House. Land valuation came up $9K higher than the previous one and they also gave 100% value to the construction costs. They're giving me 95% LVR which means I just need to come up with $6K to cover the shortfall, plus I'll get the FHOG in the latter stages.
I need to pay the 5% deposit being asked by the builder though in order for site start to happen while the bank organizes the release of funds. They asked me to keep the receipt and they'll refund me this later. Can't wait to have a definite site start date. No deposit house and land loan 16Mar 06, 2009 3:25 pm 100% Construction loans are no longer available after big changes in lending policy again last week.
You may still qualify for a No Deposit home loan for house and land package to have your perfect home rather than buying an established property. To apply for the No Deposit home loan you will need; *Contract for Sale of Land *A fixed price contract from a licensed builder for the construction *Council approved plans and specifications of the proposed house *A copy of builders current insurance policies On presentation of the above, the building project is valued before loan approval and monitored through its stages by the lender; *Tentative value of your completed project is estimated *Lender’s valuer monitors building progress and confirms the completion of each construction milestone, while the lender progressively pays (progress payments) the builders invoiced claims *Receiving builder’s invoices along with a request for funds at each major stage, your lender manages the financing of the project in stages. Re: 100% Construction Loan 17Mar 06, 2009 3:28 pm What is the difference between 100% construciton loan and no deposit home loan? Re: 100% Construction Loan 19Mar 06, 2009 3:38 pm Let me qualify that answer, thee is no difference between No deposit and 100%.
Of course there is a difference between Construction loan and home loan. Construction loan is a specific type of home loan. (Maybe I didnt need to spell that out?) Re: 100% Construction Loan 20Mar 06, 2009 4:12 pm gpierce CBA told me that during construction they will inspect and do valuations at all the payment stages before handing over the $$ to the builder. In my case, we already own the land, and the loan won't be more than the land alone is worth, so in our case they WILL loan us what we need, but they'll still do a valuation. Greg Not sure if CBA inspected the house at each stage but from Slab to Fixing Stages they were able to release the funds in 3-4 working days. I've been told that for the final stage payment, they will need to actually go onsite and check that everything is in order before releasing the final cheque. 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 18894 That sucks! Hope it all works out. Good to move away from steel anyway for all your reasons, but it's also thermally poor. 16 17724 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 35190 |