subdividing back block

These days it is not as easy as it sounds. I tried to do one recently, but the mortgage insurer knocked it back.

Basically you, subject to serviceability etc, can get a loan for 80% of the building contract and the value of the original house. But valuations are coming in tight so if you don't have much equity it may be hard.

You can't really capitalise interest, but if you have enough equity you may be able to borrow extra, put that in the offset account and use it to fund the repayments for a while.

As its such a common thing these days, there are arguments both ways. From a town planning side of things, its not always such a good thing for aesthetic reasons, but to create equity / rental returns its great. From what I know, its typically harder to sell the back block, but renting it outs a good option as there’s often a higher level of security associated with it, as well as if a whole area has been rezoned where subdividing is possible, the population density will be higher, making it more attractive for renters.

Terry’s got a good point with the finance side of it. But if you can do it well and the block shape isn’t too awkward, its often a brilliant way to invest in the property market.