I live at home with parents and have one resi investment property with a $970k home loan that is completely offset. I want to now buy another resi investment property, knock down and build a single dwelling, then sell it once completed. I know the way banks assess my loan I won’t be able to afford it and I will be about $50k pa in deficit (this would be due to the interest on the construction loan). Total interest from the construction would be $70k pa.
I want to see if I can capitalise this interest on to the loan and clear it in full when I sell the property. I think this is the only way I can afford to complete the project.
1. Will banks allow me to capitalise the interest of the construction home loan?
2. Is there a better way to structure my lending?
3. Are there any good brokers for construction funding in Melbourne anyone can recommend?
Thanks
Striker
Email MeHi Striker,
I hope you are having a good weekend.
Im actually a mortgage broker and look after the queries relating to finance for Steve and the Property Investing members.
I just want to confirm we are on the same page. You are looking to borrow 100% plus costs as well as the interest being capitalised and then repaying the outstanding debt from the proceeds of sale without having to contribute any deposit?
I do a lot of construction funding, however if we are looking at mainstream lending, all lenders are going to want interest inly to be paid monthly while the facility is active and while the property is being constructed, and most lenders will not lend more than 90% of the land + construction value for investment lending.
There are non conforming/private lenders who will look at deals based on the finished project basis and will allow all costs to be capitalised and no payments until the property has been sold, however these funders will require 30-40% deposits on the land plus construction value before even being considered. These options are also very expensive requiring an app fee of between 3-5% of the full loan amount as well as charging very high interest rates, of approx 11-16% currently, so this needs to be taken into account also.
If you want to have a more in depth chat about options and what may be available, you can email me at [email protected] OR give me a call on 0477 212 840.
Look forward to hearing from you.
Chris Berry.
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This reply was modified 2 weeks, 2 days ago by
Christopher Berry.
Christopher Berry | Find A Better Rate Home Loans
https://findabetterrate.com.au
Email Me | Phone MeTaking the Hard Work of your home loan
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