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Borrow for development

Discussion in 'Property Finance' started by TimC, 3rd Jun, 2016.

  1. TimC

    TimC Member

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    I have an old house on two lots, I am planning to subdivide and build two house on top of it.

    I need to borrow money for the development, and I have unpaid mortgage on the old house.

    The old house is under family trust title, trustee is pty ltd.

    Just wondering what kind of loan can I take for the development, like personal loan or commercial loan or mortgage?
    Do I have to borrow from the same lender of my mortgage ?
    And do I have to notify the lender of my mortgage, since the old house will be demolished.

    Thanks in advance for reading and hope to hear back from you soon.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The trustee is the owner so it will probably have to borrow. It can go to the same lender of another but to move the mortgage has to be discharged and loan paid out.

    You could also borrow using the property as security - but you had better get tax advice before you do this.


    Yes you would need to notify the bank if you intend to demolish otherwise you would be in breach of the loan agreement.
     
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  3. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    You definitely need to get the permission of the lender before knocking it down.

    I would recommend doing an equity release so you have funds available to cover the soft costs such as the contribution, architect, engineer fees, etc.
     
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  4. TimC

    TimC Member

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    Thanks Terry and Shahin.

    @Terry_w "borrow using the property as security", do you mean the old house or the new house to be built as security?

    @Shahin_Afarin Are you recommending an equity release to cover part of the construction cost, then a separate loan for the rest?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The trust's property - new or old or both.
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Yes - 1st step equity release and second step construction loan.