Need to bounce this off one or two the bods closer to this than myself:
An acquaintance of my +1 has a corner block of subdivisible size/suitable for a duplex. The problem – single, 2 kids, $50k income, owes about $100k on $450k house. No defaults or other debt.The block would suit 2 x 3 bed or 3+4 bed duplexes. Construction Budget $400k (more than doable as the block could take 2 x single storey houses for less than $300k).
So total anticipated debt – $500k, EMV $800-850k (if subdivided & sold). Rental value (for one duplex, live in other) – $26k pa
a) Will a broker/bank provide finance for a deal where the owner will hold 30-40% equity in EMV
b) Can the interest be capitalised for this one?
c) What does a broker/bank want by way of a business plan to get the deal over the line?
d) Is it better to subdivide & have on two titles (should the ownership structure change with new titles)? Would you then need two non-crossed loans (one being for residence other for IP)?Morning IP
Given that it is 4.28am in the UK and i still sulking over Chelsea's loss to Arsenal last night I will keep my answer fairly short.
1) Not exactly sure what you are asking here but assuming you are merely referring to the lvr then Yes lenders would have a problem with the numbers. This is not to say that the deal can funded on the income shown as there are too many other variable.
2) Most lenders will want the interest paid monthly especially if the deal is done as a residential loan however there are a couple of ways of getting around this.
3) A business plan wont be of any use on such a small project. Lenders will want evidence of income (payslips / Group Certificate / 2 Years Tax Returns if self employed / rental assessment). Copy of the plans, specifications and fixed price building contract for the new construction. Details of external liabilities i.e credit card statements etc.
4) This is a personal preference. Strata Titling the properties and generating 2 Titles will cost you more i.e plan of subdivision, Titles fees etc etc and each property will be rated for Council Rates. In saying this certainly you can split the loans and have 1 on each lot and keep them separate.Hope this helps.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard, sorry about Chelsea.
Qlds007 wrote:1) Not exactly sure what you are asking here but assuming you are merely referring to the lvr then Yes lenders would have a problem with the numbers. This is not to say that the deal can funded on the income shown as there are too many other variable.One house will be ppor other will become an IP. Will income for IP be factored into the loan affordability or must it be stand alone for construction?
Qlds007 wrote:2) Most lenders will want the interest paid monthly especially if the deal is done as a residential loan however there are a couple of ways of getting around this.Not sure of current repayments or if there is headroom for renegotiation on current loan, so meeting current obligation isn't a problem although it may be once the principal increases too far (staging construction may be an option as well).
Qlds007 wrote:3) A business plan wont be of any use on such a small project. Lenders will want evidence of income (payslips / Group Certificate / 2 Years Tax Returns if self employed / rental assessment). Copy of the plans, specifications and fixed price building contract for the new construction. Details of external liabilities i.e credit card statements etc.a) Person is PAYE, stable 5 yrs + at same place
b) Still kicking around options of what to do with the site (eg side x side or 2 separate dwellings with minimum common wall)
c) Credit card – minimal use low credit limitQlds007 wrote:4) This is a personal preference. Strata Titling the properties and generating 2 Titles will cost you more i.e plan of subdivision, Titles fees etc etc and each property will be rated for Council Rates. In saying this certainly you can split the loans and have 1 on each lot and keep them separate.Would be able to subdivide on Torrens Title but prepared to meet all requirements for subdivision but not complete the 2 titles.
Hi again IP
Yes some lenders will factor in potential income from the property which will be the IP.
No issues in getting the approvals yet not lodging the Titles.
Couple of clarifications there:
1) Some lenders insist that you separate the Titles (i.e NAB etc)
2) Your DA may require it within a certain timeframe. (Council might like the 2nd set of full Rates)Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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