Forums / Getting Technical / Finance / Maximum Construction Loan LVR?

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  • Profile photo of thomsonthomson
    Member
    @thomson
    Join Date: 2010
    Post Count: 31

    Hi all,

    I'm currently looking to develop a small block of 950m2 into three units and I was wondering about peoples recent experience getting a construction loan.  Cash for the deposit is at a premium so I was hoping to get finance for as much of the build as possible.  Couple of questions:

    Can I use LMI to increase LVR?

    What is the typical maximum LVR around at the moment post GFC?

    Thanks,

    Thommo

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Hi Thommo

    Small development finance is at a premium so without more information it is difficult to comment.

    It is an area we probably are getting the most number of enquiries from at the moment and there is no right or wrong answer.

    Would depend on the balance of the deal.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of beediebeedie
    Participant
    @beedie
    Join Date: 2007
    Post Count: 158

    Small development finance is at a premium
    It is an area we probably are getting the most number of enquiries from at the moment

    Thats very interesting …. what do you put that down to Richard?

    Profile photo of MarJacMarJac
    Member
    @marjac
    Join Date: 2010
    Post Count: 71

    A lot of lenders are still only lending 90% LVR for owner occupied construction (Fixed Price Contract) LMI are also being a little hesitant on some deals

    For a development deal such as yours I would think 80% LVR would be the most you could expect and this will probably not be at 'Home Loan' rates

    Profile photo of thomsonthomson
    Member
    @thomson
    Join Date: 2010
    Post Count: 31

    Thanks guys – I prob have enough cash to finance the build of one (but not three) unit at 80% LVR after I complete the subdivision so perhaps I can try this:

    1.  Build one unit and either sell or rent and hope for equity increase
    2.  From point 1, obtain enough equity/cash to complete the build

    I'd prefer not to try to sell off the plan as at the moment I want to keep them to rent.

    Cheers for the advice.

    Thommo

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Sorry Thommo

    But i have to disagree with Marjac.

    I believe you would get 90% lvr if done correctly.

    I think the enquiries have increased simply because very few lenders left are doing development deals of any kind.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of thomsonthomson
    Member
    @thomson
    Join Date: 2010
    Post Count: 31

    Thanks Richard,

    Against the trend I got 97% LVR for the property in the first place, in July this year, so you never know..

    FYI – This is my PPOR.  Finance with Westpac.  Property purchase price was $280K. 

    Thommo

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Ok might have an issue there as Westpac wont do 3 properties on the same Title and unlikely you would get separate land Titles until the buildings are constructed.

    LMI isnt going to be cheap depending on the total loan amount.

    Cheers
    '

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of gatsbygatsby
    Member
    @gatsby
    Join Date: 2003
    Post Count: 708

    Ditto to Richards comments. I wanted to change my two IO investment properties that I have/had with the CBA to their MISA account. I'm paying 6.66% too but the jargon I was fed trying to tell my local manager that it's not a true offset account (ie minimum amount must be withdrawn for use, etc) had me talking to a brick wall. I'm not blaming the staff at CBA. The girl I spoke to would have been no more than early twenties. When I told the CBA that the NAB were offering me a fully transactional offset account at 6.49% and will waive the first years fees they weren't in the slightest bit interested!
    Cheers,
    Gatsby!  

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    gatsby wrote:
    Ditto to Richards comments. I wanted to change my two IO investment properties that I have/had with the CBA to their MISA account. I'm paying 6.66% too but the jargon I was fed trying to tell my local manager that it's not a true offset account (ie minimum amount must be withdrawn for use, etc) had me talking to a brick wall. I'm not blaming the staff at CBA. The girl I spoke to would have been no more than early twenties. When I told the CBA that the NAB were offering me a fully transactional offset account at 6.49% and will waive the first years fees they weren't in the slightest bit interested!
    Cheers,
    Gatsby!  

    Yep, their a pleasure to deal with :)

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

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