Hi All,
I have a friend with a financing problem. Due to an ever-expaning set of dependants, he and his partner are looking to sell their current home in Sydney, purchase a rare piece of land that’s currently on the market nearby and build a home.
They have had some advice from a mobile banker (one of the big 4) which involves the use of a bridging loan so they can purchase the land now before their home sells.We are a little concerned they may end up paying far more fees and interest than necessary.
My first suggestion to get around this was to offer an extended settlement period on the land they want, say 6 months. This should give them plenty of time to sell and settle since they are marketing their home at 10% beneath others listed in the area. That way no bridging loan is required, they just use the funds from their home to purchase the land and then get a new loan to build the home.
Unfortunately the landowner is keen for a short settlement so this is not a good strategy.The alternative, that suggested by the banker, is basically to have a bridging loan with a line of credit that is then substituted for a standard loan within their security limits upon sale of the home. After settling on the land a new loan for the home would be arranged. Needless to say this option involves more fees and interest payments.
We are basically wondering firstly if these are the only 2 options? Are there any other strategies they could use to save some $ and still purchase the land they want? (note they are negotiating with the vendor now and have just about agreed on a price based on a quick settlement).
If a bridging loan is really the only way to go how can they be sure they are getting a good deal? What should they be looking out for?
Any help would be much appreciated!
cheers,
Ben Carbery
Hi Ben,
If your friend requires finance to construct a home on the block after the sale of the current property, then it may be more cost effective to have bridging finance with an End Loan,If no finance is required after the sale of the property then bridging finance with No End Loan may be required,
Rates for bridging finance are generally higher, around 7.07% and have higher establishment costs,
In most cases Interest on the loan can be capitalised,I hope this is of some help,
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Thanks all,
I’ll pass on the comments.
They do require finance to build but their home is worth more than the land. I suppose it doesn’t hurt to name figures. Say about 550k for the house, 415k for the land and 250k to build.
The reason I say rare is just because it’s the last good block in this part of rapidly developing western sydney, but for some reason homes and land in the area are mostly listed at now unrealistic prices. That means they can probably get the land at the price they want now but if they wait they will have to look in a completely different area.
cheers,
Ben CarberyI’m feeling quite naughty… so I’m going to burst a few brokers bubbles here…
How delightful [laugh]
There are a few bridging loans out there, but this one is my new favourite – check it out…
Heritage have a new product (introduced 1st May), it is good if you have an end debt, as you can borrow 72% of the property to be sold, but up to 95% of the property to be bought, like a normal loan product. How interesting! This means on the bridging finance he could get 6.83% and on the residual loan he could get 6.48% a discounted product if he liked (I’m assuming this OK as I havn’t done one yet)…
Still, I am pretty sure that is how it works!
<I hate quoting rates on the forum, please not that they are not comparison rates>
Liz
Mortgage Lender
I think so…
at settlement.
Will check at a more conveinient hour of the day [dazed]
Liz
Mortgage Lender
Iambored… Regarding your post on Adelaide bank… you are posting intro rates that revert to the SVR.
These intro rates (lasting for 6 or 12 months) CANNOT be taken in conjunction with the greatsaver rate of 6.54% that you quote. YES it can be taken in conjunction with the 6.69% fixed rate you quote, but that is a 1 year fixed rate.
Go-Between Loans are not available with Greatsaver or HomeBuyer Power, although at the end of the Go-Between period you may request to convert to HomeBuyer Power.
HomeBuyer Power comparison rates start from 7.25% – ew! Thats with an intro rate.
I’d still be sticking with Heritage if I wanted the best rate…[wiseguy]
Liz
Mortgage Lender
I am sure that Rob didn’t do that deliberately just to win an argument, Liz.
Pisces
It looks to me like the best you could get is the SVR with a 12mth discount at 7.06% (comparison rate), but that converts to the SVR not a discounted rate of 6.54% like you said.
I thought that it may have been misleading to quote the rates in the same sentence as the product says you cannot switch to the 6.54% product, you can only change to the Homebuyer Power (NOT Greatsaver 6.54%). Re: Switching to other products are allowed… yes true, but restricted.
No Adelaide don’t require to refinance your original loan, so it’s good if the time taken to sell (1 to 6 months max) allows you to escape a payout fee. So they are competitive in that respect, and ratewise they are OK.
However, for the lowest rate, Heritage has the best I have seen so far. The product is interesting as you can take 95% of the new security, and 72% of the old one (plus capitalized interest for up to 6 months).
What do you mean by easiest policy?? That could mean anything my friend! Outside normal NSR is ok, but that comes with most bridging loans…
Ben… I don’t see any other ways around it. Bridging finance can seem expensive but in essence the banks are lending you money you could not usually afford to pay off. Just make sure your pal looks at all the rates and fees so there are no nasty surprises!
If you can’t see it in writing it isn’t true [wink2]
Liz
Mortgage Lender
You do have a good point in Adelaide banks policy. I’d say they are ahead if the client had a genuine need for this product…
but for good rates… the big H [smug]
I did not quote comparison rates for Heritage. Most rates will look ugly if you look at the short term comparison rate, skewing the rate upwards with applicaitn fees etc, in all fairness I try to take 25yr $250K comparison rate as the avg loan in Sydney is $250K. Splitting hairs really, and I bet most people don’t even know what we are talking about anyway!!![bomb]
Lower end? You mean small loans?
Are you implying that for a $350 switch fee you can revert from an intro rate with Adelaide to the greatsaver? or from SvR to greatsaver, with the bridging product? What are you saying here I am only a blondie remember!
Forgive me if I don’t respond here for a while I’m going back out to the real world.
Liz
Mortgage Lender
iambored, why don’t you edit your profile and take out the option of people sending you PM’s and emails then?
Cheers
MelRob, I’m not the signature police, so can’t tell you if you can have it or not.
To be honest though, it annoys me a little reading it after everyone of your posts[biggrin]
If you take the option out of your profile, it should then take away those two options under any of your posts. the only emails you would then get would be the ones where people have found your email on your other posts I guess……
Cheers
Mel
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