We have so far consulted 4 major banks (CBA, NAB, Suncorp and Westpac, with applications made through 2) and a mortgage broker about our situation but are coming up with no solution. We do not want to make any further applications without a promising outcome.
The problem:
We are trying to buy 22 acres in a prestige acreage estate (NOT a regional centre) with the view to retaining our PPOR as an IP and building our new PPOR on the land.
Land Purchase price – $320,000
Construction – $200,000 (although we can go less, but prefer not to)
Mortgage on PPOR – $325,000 last bank valuation was $415,000 with renos due for completion soonNet combined income – $124,000 pa
2 dependants
Commercial car loan – $28,000 (interest capitalised)
Personal Loan (for renos) – $28,000
Credit card limits – $10,000How can we structure the deal and is it possible at all? Clearly LMI is going to be required and our current mortgage will need to be refinanced (as they will not lend more than 80% LVR – Virgin Home loans who have since ceased lending). Lenders are baulking at the deal as it is 22 acres and they do not like to lend over 80%. However, the block is in an acreage estate on the gold coast (with the majority of the blocks being 1-8 acres) with town electricity to the block and sealed roads, council maintenance, street lights etc. All properties in the area (regardless of land size) require water and sewage tanks.
Being xmas we are aware that all lenders and LMIs close up shop till the new year. This is not an issue as an extension is being sought on the finance approval. However, failing the approval of finance our only other option is to seek to ammend the contract with a sunset clause and hope that our equity improves before somebody else makes a better offer.
Another point of note: we secured that land at $105,000 less than asking price, will asking for the valuation of the land help in securing a construction loan for the house?
We need to tie this up neatly but so far it is just one huge mess. Any new insights would be hugely appreciated (even if it's just to tell us that we're dreaming!
Thanks in advance!
Helen
Hi somewhere over there,
Unfortunately, as soon as LMI is involved the ball game changes – there are strict criteria with regard to land size, usage, zoning, loan purposes, and postcodes. TO give you a general idea, if the two majors you mentioned wont do the deal, I dont like your chances elsewhere. FOr example, with LMI you will likely find 5 acres is the largest size that will be lend against a vacant land, and 25 acres with a residence, and it must not be income producing. Unfortunately, you will likely need to have the 20% to get this one happening, assuming it is zoned rural living or residential. Having the utilities and sealed frontage should mean that without LMI it will be good. All the best.
If the new property is such good value or represents your lifestyle dreams then maybe you should sell your existing property. This should mean you could buy the land and then focus on building up savings so you can look at construction later on
Selling is definately an option and should it come to it this is what we will do. However, at this point we will not sell before we have to settle on the land, and we are having trouble getting approval for finance on the land, not the construction (due to the size of the land, no other reason). Time is our problem right now. Thanks for the suggestions!!
Hi,
Can you advise why CBA did not like this deal please?
The LVR seem OK as 89% + LMI
Purchase price ($320,000) + purchasing costs ($13,000) + existing loan balance ($325,000) / value of both properties ($735,000) = 89%I havent checked servicing ability but that look OK too from
Marty McDonald | Mortgage Experts
http://mortgageexpertsonline.com.au/
Phone MeAgreed with Marty. Land is OK up to 125 acres. Must be something else they don’t like so I’d get clarification…
No dwelling on the land could be the reason? I had a rural/residential deal on a 40 acre block a couple of months back and CBA were keen to ensure a dwelling was on the block.
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
No dwelling on the block is definately a problem, also the fact that we took a repayment holiday in January when our second child was born (feature of the current loan). CBA did not like it. However, new statement is coming through on the 31st Dec which will show up to date payments, etc. CBA is still on the cards at this point.
Thanks so much for your replies!
If you can get finance with CBA and you are having trouble elsewhere then I would suggest going with CBA. You could then look to refinance in a couple of years once your new house in build on the new block. At least this way you will be able to settle.
Cheers,
Luke
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