Hi everyone!
Can anyone please advise me on what would be the best way to go about the following:
I want to buy a house on a large block, subdivide the block and build two 2brm units at the back. What would be the best way to apply for a loan to cover this – eg, get a construction loan as an option to the housing loan? Get two separate loans? Any tips/advice/things to watch out for would be greatly appreciated.
And, can anyone recommend a lender who would give me all this as a Lo Doc loan plus a LOW RATE?
Please see specifics below……..I would only be eligible for a Lo Doc loan where I have had an ABN number for two years but no paperwork ie., I could declare my income and declare that I can make the repayments but I have no paperwork to substantiate income/tax returns, etc, so that would limit my available lenders.
Also the property would be in Tasmania (postcode 7325 / 7320).
I would have enough cash to have a 20% deposit (80% LVR) for the House Loan and between 20 – 40% (60-80% LVR) deposit for the construction Loan.
I would prefer the House Loan to be split 85% FIXED Int Only and 15% SVR Int Only and have a 100% Mortage Offset account (eg MISA) attached to the SVR part of the loan.
Also being able to access any available equity on that loan would be a plus.
I look forward to hearing from you all,
Freedom
Hi Freedom
Ok the way to approach this sort of deal is to work backwards.
1) Will you be purchasing the property in your own personal name or using a Trust / Pty Ltd Structure.
2) Will the land be subdivided into 2 Lots prior to constructing the units on the back block (If not will you have 3 properties on the 1 Title whilst the subdivision is being approved – Not liked bu the mortgage insurers).
3) What sorts of purchase price and construction costs are you referring to.
4) Post codes may cause an issue – 7325 Is Cat 3 with Gemworth but 7320 is unacceptable. PMI is on application.
The self insurers may look at it but there are other consideration there.All other requirements should be able to be catered for subject to the above.
Richard Taylor | Australia's leading private lender
Hello again Richard!
Thank you for your reply.
1) I thought that I might use a Trust structure at some stage in the future (not necessarily this project), but I have yet to talk to a solicitor about it. What bearing would it have on being able to get this loan? I believe that getting future loans in a trust may be easier?
2) I will subdivide first. The two units will be strata titled ( is this the correct term? – each could be individually owned but with common ground eg driveway)
3) House purchase price approx $180k and 2 units, construction costs approx $132k each.
4) Not sure if you and I are on same wavelength with postcodes – 7320 is Burnie, Tas and 7325 is Wynyard, Tas. I know CBA, WBC will lend me with those PC's for buying a house but unsure for construction loan.
I look forward to hearing from you,
Freedom
Hi Freedom
Yes just remember that every lodoc loan over 60% is mortgage insured so it is not the lener but the mortgage insurer who sets the terms of reference when it comes to acceptable securities.
Reason i ask about trust structure is that some lenders will not do lodoc in Trust.
Ok if you are going to subdivide first i think you request can be accomadated.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thank you so much for your advice. I have been reading the forums (I don't have much to contribute yet as this is my first foray into it all!) and you seem to be very knowledgeable regarding all these matters so may I ask you something else?
How much more, if any, are construction loans going to cost compared to regular housing loans?
I have yet to determine the exact costings of my project, but I was right next to a branch of the CBA and thought I would just pop in and make a general enquiry to get an idea to base my initial costings on. At the time I didn't mention construction loans as the idea hadn't occurred to me. I have been working on home loans SVR of 8.17% and Fixed 5 years @ 8.25% from what I can gather from the CBA and I think they are probably one of the most expensive lenders (although I haven't looked at their comparison rate for these particular figures).
If I base my rough costings on these amounts for both the loans would you say those percentages would cover me? Naturally I'm hoping when I firm up my figures and actually start looking for lenders that I would get better rates than the above!
Cheers,
Freedom
Hi Freedom
No problems always happy to help.
You will find difficulty with CBA if you are looking at a Lodoc product and using a Unit or Hybrid Trust.
Also whatever they tell you there offset account is not quiet a true 100% offset account.
With most lenders that we deal with you will not pay any more for a construction loan.
CBA the current SVR is currently of 8.67% (You may have asked them after the latest increase last 9 days) for the variable portion and the CBA 5 Year fixed rate is currently around 8.44% with a $8 / month monthly fee.I believe with alterantive lenders we could do considerably better than that.
Let me know if we can assist.
Richard Taylor | Australia's leading private lender
Thanks Richard,
No doubt will be in touch!
Freedom
Pleasure
Richard Taylor | Australia's leading private lender
Please see specifics below……..
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