All Topics / Finance / finance for land subdivision

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  • Profile photo of grant7grant7
    Member
    @grant7
    Join Date: 2006
    Post Count: 59

    Hi everyone,

    Just wondering with finance for small landsubdivision ie say 5 lots.
    Assuming the original lot is owned with 20% equity, if I need 150k to do the subdivision can I borrow that 150k against the end value of the created lots? Typically what % of end value is likely?
    As I’m not building houses there is no fixed priced building contract for the lender to go on. So how does the lender verify what the subdivision will cost? Is it just a matter of me showing them all the qoutes?
    Hope this is clear!

    Thanks

    Grant

    Profile photo of MortgagemanMortgageman
    Participant
    @mortgageman
    Join Date: 2004
    Post Count: 164

    Hi Grant,

    If you have 20% equity in the land at the moment you may be able to borrow up to 95% and use this to fund the subdivision. Otherwise, if you have fixed contracts in place and can substantiate all of the costs of the subdivision (engineering, surveying etc) and can service the debt, then you should be able to get a loan against end value (65% is normal, although you could get a bit more with a higher rate). Hope this helps.

    Kind Regards,

    Cameron Perry
    Director
    Perry Financial Strategies
    Level 13, 30 Collins St
    Melbourne VIC 3000
    Ph (03) 9662 1999
    Fax (03) 9662 2044
    email: [email protected]

    Profile photo of grant7grant7
    Member
    @grant7
    Join Date: 2006
    Post Count: 59

    Thanks Cameron,

    There would be no fixed contracts involved, just qoutes from contractors. Would that be OK to substantiate costs?
    If it was 65% of end value would there be MI involved?
    Considerint the low LVR would full financials be required (ie. full income / assets etc…)
    Would it be postcode sensitive?

    Thanks
    Grant

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