Finance for build subdivision

Viewing 5 posts - 1 through 5 (of 5 total)

Dogigity
Member
@dogigity
Join Date: 2010
Post Count: 3
April 6, 2010 - 2:59 am
Hello everyone,
I have a block of land 740sqm with a house at the front.
I want to build on the back and create a new title in the process.
The existing house and land is valued at about 470k. Still has a mortgage of 80% LVR against it.
The cost of construction and build-strata subdivision is about 280k
I went to a mortgage broker and was told that I would not be able to borrow against the completed value of the two titles.
The broker said I would have to borrow at up to 90% LVR in order to fund the project.
I have no issues with cash flow, just capital
My question is; Can someone lend me money based on valuation of two separate titles?
I want to keep my LVR at 80%
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
April 6, 2010 - 3:35 am
Probably not as your LVR would be too high.
What you will get, in general, is 80% of building contract and 80% of land.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email Me
Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Dogigity
Member
@dogigity
Join Date: 2010
Post Count: 3
April 6, 2010 - 4:40 am
OK, so you are saying that no lender would finance it as two individual titles as if it were completed?
My idea is that upon completion the two lots would be worth 400k for the front and 460k for the back
Therefore total value at completion is 860k
Borrow against it at 80% LVR to finance construction
So in total I want to borrow 688k
If I pay out the existing loan of 376k, I am then left with 312k to do the construction.
Am I right or will no lender look at it this way?
Diggity
WhatIfWeFinance
Participant
@whatifwefinance
Join Date: 2009
Post Count: 58
April 6, 2010 - 6:27 am
In my experience a lender can finance this as 2 individual titles provided the block is already subdivided. If it is not subdivided then they will see it as one title one deal.
The next thing you need to consider here are what the lender is likely to value the sub divided property at. Remember bank valuations at times can be a little "flakey" so you need to be armed with enough information – comparable sales etc
Regards
Dogigity
Member
@dogigity
Join Date: 2010
Post Count: 3
April 7, 2010 - 5:23 am
Terrw and WhatIfWeFinance
Thank you for your replies and information, this helps me to budget
Dogigity