Hi guys/girls. Something I have wondered for a while now after reading it in numerous books, and also in the ‘Experiences’ of various investors in API mag etc, often people mention (including Steve McKnight I might add) Getting a valuation done after they have made improvements during / before the settlement period as a result of getting early access to the property, and then getting the loan on the new higher valuation @ 80%, and in effect paying nothing – in other words getting the LVR basde on this, not the actual contract price. My question is do any of the brokers or anyone who has done this care to nominate a couple of examples of who they have used for this? The ‘big’ banks and of course both the main LMI companies, finance the Lower of valuation or contract price, with usually the only exceptions being for a family/favourable purchase. I realise many revalue after 6 mths or so and get a ‘top up’ that way, but can anyone enlighten me? Thanks! [strum]
I think the LMI companies will only accept loans based on valuations if there has been 12months or more between signing contract and settlement.
If the value at settlement comes in at less than 80% LVR, then LMI is able to be bypassed. I have done a few loans like this will Bankwest. 2 to be exact. Haven’t seen anyone, other than these two clients, able to pull this off.
Terryw
Discover Home Loans
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I think you and terry are right, but I give you my current project as an example where I should get finance on valuation, not purchase price:
– Offer made now with 12 month settlement period.
– Subdivide property into 5 parcels over the next year.
– Get new valuation and five loans for existing house and four new parcels with building contracts at 80% LVR.
– My MB wants to get preapproval, but believes there will be no problem.
– Hope this helps.I disagree i am aware of 2 separate lenders who will lend on valuation and not purchase price from Day 1 dependant on the client and the property.
1 is public listed company who specialises in commercial funding but will also take residential security and the other is a private lender.
GR lending is standard practice in development deal so nothing new there.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
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Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Richard, what is GR lending?
And did you mean my example is standard practice? Because I understand if I buy a property and build a house, you get finance on land and house price combined. But here I only pay $240,000 for the property, but will get loan on about $400,000 after subdivision plus extra for houses.
Please clarify.
Forgive my ignorance…..
How, and under what circumstances can one organize access to a property before settlement? I got the seller to open up our current for an hour or so a couple of days before settlement so I could move some furniture in, but this is hardly what we’re talking about here is it!
What is an LMI company?
Cheers
David Coffey
David
Many development deals allow the purchaser access to renovate the property at his expense and liability prior to settlement so there is nothing new there.
LMI – Lenders Mortgage Insurance.
GR lending is lending against the Gross Realisation of the development.
Assume I purchase a block of land for say $250,000 and build 3 Townhouses on the property and the total valuation of the end product is worth $1 Million then i am able to borrow against this figure even if my total costs may have only been the land price of $250K plus 3 x construction and other costs of say $175K each ($525K) = Total $775K.
Hope this clarifies.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Thanks for the replys/input etc. I understand that this is how it can be worked as a ‘development’ and off the plan purchases go. What I was referring to (I think Terry had the idea) was where you read of someone who buys a house for say, $150k, at whatever LVR, gets early access, does a quick ‘reno’, and somehow gets it revalued at say $200k, and then gets the 200k financed, thus in theory doing a no money down deal. Nothing I plan on doing at this point, but I am keen to learn what method and or financier is utilised to do this. As far as early access goes, I bet everyone could tell a good story there……. It can be reisky stuff that’s for sure. Heard of one recently where a builder put in an offer of X on a property, with early access to do rennovations, hoping to onsell around the time it settled. Went overboard, (did the whole knock out walls, new kitchen and bathroom thing) and at the last minute just before settlement the vendors current lender (Baaaaa!) decided to not allow it to be sold as it had turned into a property with negative equity. The outcome? The new purchaser ended up paying the extra $25k or so required by the lender – and killing about 1/2 his profit. ……..Anyway, I have digressed. [strum]
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