I currently own a block of land outright that sits on one title. Council has given approval to community title the land into 3 blocks. I have not yet taken the final steps to get the three titles. Those steps are basically the payment of some money and the lodgment of a final plan with council.
I now want to take out a mortgage on the property. As one block, the land is worth about $160,000. As three titles the land is worth about $375,000. A bank has agreed to mortgage the property. Today the lender came back to me with a dilemma. They are prepared to lend me 80% against the value of the three titles but currently there is only one title. The bank's concern is what will happen when three separate titles are issued. Will this mean that the bank then holds a mortgage over a title that no longer exists?
Basically the bank has said to me that they can only lend against the one title until such time as I get the three titles unless I can come up with a way to overcome their dilemma
Has anyone come up against this before? Any suggestions on how to overcome this?
Comments would be appreciated.
Cheers
K
Is there any particular reason why you dont complete the subdivision first? Sorry for such an obvious question!
TThe bank will only lend on what it is at the moment, but just having the approval to subdivide should have added value and increased the amount you can borrow.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Tammy
The reason we are getting the mortgage now is because we have a serious cashflow shortage! We need the money to continue the subdivision.
Terry, the valuation didn't say that the approval made it more valuable, but what the bank has agreed to do is to lend me 80% of the current value and once it the three titles have been issued the bank will increase the loan to 80% of the subdivided amount.
I've got to hand it to Commonwealth Bank. They have been excellent with me on this deal.
Cheers
K
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