Browse Forums Home Finance Re: Deposit on Land . . . does it count?? 5Feb 25, 2010 5:28 pm Logan and Thlo are dead on. If you are planning on saving further funds. Aim to have at least 10-15% of the total amount you need saved and available. So for example. Calculate what 15% of the land and construction is. Deduct the amount you have already placed down on the land. You should try and aim to save as much towards the figure left over between now and the land settling. If you will be eligible for the First Home Buyers Grant you could take this off the amount you need to save also. So for example: Your land is price is $200,000.00. Your build will be $200,000.00. The total amount needed is $400,000.00. 15% of this is $60,000.00. If you have already placed a deposit of $20,000.00 (5%) on the land. Then you are aiming for a further $40,000.00 saved. If you are eligible for Fhog take this off the figure and work towards saving the remaining amount. This is just a guideline but it gives you a good target. As there is no way to know exactly how the lenders/funders are going to adjust their lending criteria if you aim for this larger deposit then it will put you into a better position than if you werent. The basis for the 15% target I have outlined is to enable a 10% deposit towards the land and construction with a buffer of 5% over that to cover fees/charges etc. Therefore giving you a little bit of head space. Hope this helps. . Regards, Trent Davidson Property Finance Consultant Residential Lending LJ Hooker Finance Brisbane North Credit Representative Number: 387283 under Australian Credit Licence:380270 Re: Deposit on Land . . . does it count?? 6Mar 12, 2010 9:06 am Just to extend from the OP, in this sort of case, is there any reason not to plow the $$ into the land rather than build it up in the bank? (Talking finance for home here, not rainy day/job loss backup and things like that) If ive paid 50k off a block before I try to build, will they look at that differently than if Ive paid 10k off a block but have $$ sitting in the bank? Re: Deposit on Land . . . does it count?? 7Mar 12, 2010 12:00 pm Hello Lakie, They will look at it much the same either way. If you have land of $100k value and you have used a $50k deposit. Your lend is $50k only thus a 50% LVR. If you then build on that for $100k. Your lending at the lend is the $50k for land plus the $100k for building. Total of $150k secured against the land and build cost ($200k total). End LVR is 75% (ignoring fees for ease of figures). Alternately, you could buy land for $100k only use $20k deposit (avoid Mortgage Insurance). This is an 80% LVR and you have $30k in your pocket still. You then build for $100k but then you can put $30k into the build yourself meaning lending is only $70k. End result is $80k lending for land and $70k lending for the build. Total loan $150k end LVR 75%. Thus in the banks eyes much the same risk level overall. It is smart however to use the smaller deposit (scenario 2 above) as this will leave you 'cash' funds to cover the required deposits for the builder which can be anywhere up to 10% plus costs for surveying or engineering, planners etc. So to answer your question Lakie. You can plow a larger amount into the land loan. However, you will either need to draw some of those funds back out for deposits (if redraw is available) or you will need to do a topup/increase to your loan against your land value to cover deposits. There is No right or wrong answer here. Just what will suit your requirements and specific circumstances. What is BEST PRACTICE though. Is to have the ENTIRE structure put together in the one finance recommendation/proposal. So that it involves both stages of lending (land and construciton) even if they are done seperately and months apart. This will give a better overview of costs/fees/deposits that need to be accounted for. Regards, Trent Davidson Property Finance Consultant Residential Lending LJ Hooker Finance Brisbane North Credit Representative Number: 387283 under Australian Credit Licence:380270 In NSW the maximum deposit for building work is 5% until the builder provides HBCF insurance 1 4826 I've just built 3 stairs off a landing out the back and been told by the private certifier I need hand rails sorry tried to attach a pic but couldn't mine don't have sides… 5 5712 i had the my concreters concrete right up to the fence. I have pits all along my path, so the water tends to drain away from the house and into the pits. There's only one… 7 12777 |