We have recently moved into our new house that is valued at conservatively around 400K and our debt is 200K.
I have an opportunity to buy a block of land that has been sub divided for 140k and build a townhouse for around 180k. So total cost 320K. At completion the place would easily be valued around 380k and generate rent of about $380 per week.
But i just cant quite figure the best way to do it all. I know at completion the rent should cover most of the IP debt i may be short a little bit. I have heard about using LOC to fund these sorts of things which i could do off my own home loan. But i do quite understand the interest payment structure of that.
So you can see i am nearly there, i just need someone a bit smarter than me to give me bit of guidance and advice.
Hi Hulkster
Ideally you dont want to cross collaralise the 2 securities so need to be careful on how you structure the 2 loans.
Probably easiest way to go is to look at an investment line of credit secured against your PPOR to cover 20% of the land & building costs and then through a separate lender look to take out standalone interest only investment loan.
Your mortgage broker should be able to give you some suggestions for suitable lenders once they have some further hard data.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Hi HulksterIdeally you dont want to cross collaralise the 2 securities so need to be careful on how you structure the 2 loans.
Probably easiest way to go is to look at an investment line of credit secured against your PPOR to cover 20% of the land & building costs and then through a separate lender look to take out standalone interest only investment loan.
Your mortgage broker should be able to give you some suggestions for suitable lenders once they have some further hard data.
Thanks for that, with the LOC against my PPOR how are the repayments on that structured? So say i borrow 60k as a LOC against my PPOR how and when do i have to repay that.
Hi Hulkster
Richard is on the right track in stating to see a broker, or bank you may be dealing with.If you had a line of credit the bank will lend the 20% for example against PPOR and it will be drawn up as a interest only
account you have access to.
The other 80% may be a land and construction loan to allow for the payments as the building is constructed.You would need to purchase the land first and then complete a building contract for the exact value so the bank knows the end value of house and Land.
You have enough equity in the PPOR , so if you think you can build the townhouse for $180k which seems cheap depending on size then go for it.
You will realise when the bank /broker explains it to you it really isnt that hard, and you will wonder why you even stressed about it.cheers Jason
Hulk
Interest is charged on a daily basis and debited monthly on a the Line of Credit account similar to a normal interest only loan.
Difference is the flexibility of a LOC.Initially what would happen is you would take the land loan to 80% and then 80% on the construction costs.
Interest would be charged on the land and then progressive interest repayments at each stage of the building process.
Normally most Building Contracts allow for 5 stage payments.Richard Taylor | Australia's leading private lender
Hi, are you sure of the costing? What about interest during the period of building & before the place can be tenanted? What about the finishings? Fencing, driveway, clothesline, air cond etc? Conveyancing, stamp duty, strata fees, etc>
KY
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