I am in a bit of a spot and need advice
We have 2 properties/mortgage as follows:
vacant land valued at $165K in my wifes name, mortgage of $127, $93 K owing, Difficult building site, only real possibiity of a sale is to build on it and sell. The land was valued at much more a year or so ago, but the market has fallen flat and there is an influx of land ont he market currently.
PPOR – valued at $350, mortage of $260, owing $250K.
these loans are with 2 banks. One is a land loan, the other is normal home loan. Both variable rates,We have approached the bank to borrow money to build on the vacant land, but they only lend up to 80% of the land value – so $123K . We already have borrowed that, so there is no possibility of borrowing anymore money. Basically we can not get money to build. Surely there must be a way. How does other investor's go about buying vacant land and getting funds to build. If this is the process, surely there is no point in buying vacant land.Does this mean if you are buying vacant land, that we need to purchase it outright next time, so that the bank will lend money to build? Am I missing something here, as I am very confused, and am feeling like I have made a big mistake if I can't get funds. Currently only one of us is working, self employed, not on a great wage. What would be our options, if selling the land is not an option, and we need to build? Are all banks similar? Maybe I would be better off forming a company, selling the land to it as an investment of house an land or something?? Really need help as stuck. If I sell the land,I may lose alot of money due to the market. Maybe I can rent the PPOR and borrow against it??
ThanksHi,
Wow – I came here to post something VERY similar to your tale of woe.
I dont have any answers, but I have lots of empathy…Like you I have vacant land… I thought I would be further ahead in getting myself in a position to build.
But last year I paid $10k in Land tax alone. That $10k and some interest was what I was going to use to kick start the building program.
NSW Govt really wants to slaughter investment and initiative.
Another year is passing – I will soon be up for another $10k – or more – as the VG seems to have been busy – and I will be further in a hole.
Also it is council rates season -more $$$$$ out the door and no return.I cant sell.
Also, I dont really want to sell, because if I could just get a building on the ground I’d have a fabulous positive cashflow…
Hang in there … maybe someone here will have a great solution.
Refinancing both your mortgages should yeild:
80% of Land(0.8*165k) = $132k which should give you an additional $39k
80% of PPOR(0.8*350k) = $280k which should give you an additional $30kProviding you can finance the additional $69k of debt. Can't see much more than that floating about from those assets though…
You could mortgage further than 80% on your PPOR and pay LMI but that really seems like squeezing yourselves for everything you have – still perhaps a way to get some more.
If you wish to build you should be able to get 80% of the value of the land and 80% of the price of the building contract – subject to income etc.
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
It sounds to me that serviceability is the issue but again without exact figures difficult one to answer.
If this is the case lodoc probably not an option as most lenders wont consider lodoc refinance.
As has been pointed out utilising a LOC to 90% and funding it this way is an option.
Land on its own probably without a rental return (unless there is some decent potential capital growth) is probably not the greatest option so building on it might give you a return.
Richard Taylor | Australia's leading private lender
Can i ask where the land is located?
Perhaps A kit home or a rentable transportable home could be a cheaper option? I know that there are business hurting in these markets and there are some good deals going.
Cheers,
Mick
If you have a fixed price building contract that the bank and valuer can see, they will potentially give you a percentage of the costs to build the property. They will look at what the end value of the property would be and asses it based on that. So if you're going to spend $200k building, but it only adds $180k of value, then you'll get less. On the other hand, if you're going to spend $200k and add about $250k of value, the bank WONT take that into consideration when lending the money, they'll still give the same LVR as if it's come in on the dollar.
If it's a difficult block of land, make sure you're not over capitalising as that could end up eating into your profit, and it will also make it harder to fund.
You appear to have sufficient equity to make up the difference that the bank won't fund, but it needs to be a fixed price contract with a registered builder.
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