95% LVR Vacant Land?

Discussion in 'Loans & Mortgage Brokers' started by leon brown, 8th Jan, 2019.

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  1. leon brown

    leon brown Well-Known Member

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    Are any lenders doing 95% LVR for vacant land?

    *Permanent employee
     
  2. tobe

    tobe Well-Known Member

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    Get a build contract. There’s lots of risks and extra costs settling land first.

    Why do you want to just buy the land? Most of the reasons people have really mean they should wait and buy the land at the same time as getting a build contract.
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    owner occ ?

    ta
    rolf
     
  4. leon brown

    leon brown Well-Known Member

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    I want to buy the land and get DA for multiple dwelling.
     
  5. dell

    dell New Member

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    Would you mind elaborating on this some more for me? I have a block of land due to title in the middle of the year. I will have a 20% deposit for it (have already paid 10%). I will be building but have to sell my overseas PPOR first and this may not be finalised before the land settles. The profit from this will be used as the deposit for the build, so overall LVR for house & land will be under 80%. I presume i’ll physically need the money in my account, rather than a signed contract for the sale of the overseas house before the bank approve the loan for the build portion? Meaning i wouldn’t be able to sign any building contract??
     
  6. tobe

    tobe Well-Known Member

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    That’s a long shot.is the plan to onsell once the DA’s approved?
    Thsre are lenders that can do 95% but it’s hard, usually only for OO. Your better off trying to raise 12% and keeping the lvr under 90%.
     
  7. tobe

    tobe Well-Known Member

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    Most lenders wouldn’t want to formally approve the loan until you had the AU cash in the bank, but they could accept the valuation, verify your income etc and give you a conditional approval.
     
  8. dell

    dell New Member

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    Yes, that is what I thought. I'm interested in why you said though that there are extra risks and costs associated with settling the land first as this is likely what is going to happen in my situation I expect
     
  9. tobe

    tobe Well-Known Member

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    Risks are valuation shortfall, changes to your circumstances, lender policy etc.
    costs are changing/unknown site costs, diferent stamp duty/concessions, fhog payments.
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Tobe is the construction king.

    been around the block a couple of times, so id look really hard at working withing what he suggests

    risk management
    ta
    rolf
     
  11. Beano

    Beano Well-Known Member

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    JohnPropChat likes this.
  12. Adrian20

    Adrian20 New Member

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    How is buying the land first more a risk?
    My partner and I are looking to buy land first lending 80% from the bank, and we will cover the 20% + Stamp duty. If it makes any difference we are buying land off her mum and at about 20k cheaper than what is worth. so maybe less of a risk for us?

    Also, construction loans normally interest only so buying land and paying P&I while the house is been build, wouldn't this be a good idea for some? Our brokers suggested us to do it this way.
    Still new to all of this so correct me if I'm wrong :)
     
  13. tobe

    tobe Well-Known Member

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    It’s rare for land bought in new estates to appreciate more than the sum of repayments. It’s hard to pay the land loan, rent and save the build deposit. Your case might be diferent.

    First home owners will need to pay full stamp duty in many states, and can’t access any first home owner grants until they build.
    The risk in committing to the land is the site costs to build could be more than expected. That your details change or the lending environment changes. Valuations, or the wider property market changes. Any of these variables can mean your stuck paying for land you have to mow and can’t build on.
     
  14. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    This!

    It's a tough deal to place. I'm usually not a fan of any land + construction deal that involve LMI due to the number of variables Tobe listed above. At 95% it's very risky.

    Cheers

    Jamie
     
  15. Speede

    Speede Well-Known Member

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    What about at 80% lend?
     
  16. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    .

    80% LVR is a gazillion times easier to finance then a 95% deal. There will be MANY more options when it comes to lenders and likelihood of approval is MUCH higher.

    Cheers

    Jamie
     
  17. JLK

    JLK Member

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    What about with a security guarantor?
     
  18. tobe

    tobe Well-Known Member

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    It’s the same risk and then some, for the guarantors.

    People buy vacant land all the time. Most of the time everything’s fine.

    Most of the people I have seen who purchased land and sat on it would have been better off waiting and foregoing the interest paid and buying the land and house together.

    Some of the people I have seen got into trouble. Either their valuations didn’t work once they did have a build contract, or the site costs were scary, and not recognised in the val, or their details or the bank’s policy had changed and they could no longer get a loan. Any of these are possible at any LVR.
     
  19. Harry30

    Harry30 Well-Known Member

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    Great post Beano. I really like the idea of offering a ‘ground lease’ on land that you own. Buy a block of land in a commercial type zone. Sit on it for a while (negatively geared). Then when the time is right, offer a ground lease (say 30-50 years) to an acceptable tenant. They get to build the exact building they want to their own specification with complete flexibility, and avoid the capex associated with buying the land. You enjoy zero development costs and no maintenance hassles going forward.

    Has anyone on PC successfully offered a ground lease on real estate (land) they own?
     
  20. Beano

    Beano Well-Known Member

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    There are many people who have created the leases
    Speaking to these people you have to have something people really want something they cannot buy freehold . (Just like asking a tenant at Westfield's why do you buy your own premise. .well I want to operate in the mall and there is no ownership option)
    ABC own their building in Brisbane but not the land
    Australian Post own the GPO building but not the land
    Would you buy the Chrysler land if offered to you ?