Can I back out from an approved finance?

Thanks Peter, I really appreciate your input. I will speak to broker.
researching online about vacant land, looks like most lenders dont consider lending on vacant land.?! and has time frame to build. by our calculations we will have close to 50% deposit before settlement. lets see, else we loose 10% deposit.

 

Thanks Colin for reply. Hopefully my broker will take it easy. I mean I could understand the age decay of an old house but 10-15k cost in coming month is a 'no thanks' category.

 

Not true. Just about every lender will accept vacant land as security.

 

really.. thats just a huge relief to hear. so far from this morning I have been worrying about losing deposit. does all of them has time frame to build ? how difficult is to get construction loan?
I also read on the internet that before settlement bank/lender will do valuation based on market price and not the contract price ,then will we have to get bigger loan? I know I am asking funny questions but that just gives away how inexperienced I am about property market . This forum and you guys have been a blessing ..thanks again @Colin Rice , @Peter_Tersteeg , @Jamie Moore @Terry_w and all for replying.

 

@novice I can think of a lot more lenders that will accept vacant land than lenders that won't. They don't have any time frame in which you're required to build at all. Construction loans have the same qualifying criteria as any other loan, the only difference is they value the property based on the end result of the construction (which is why they ask for fixed price building contracts). This makes the property a little more difficult to value.

Properties are valued on the market value of the property - what else would they be valued on after all? Banks will lend against the lower of the market value or the purchase price. If the valuation is lower then the purchase price you'll need to make up the difference, if it's higher, they'll lend against the purchase price (with a couple of very rare exceptions).

When you and the vendor agree to exchange a property for a certain amount, you're effectively defining the market value of that property. When you purchase a property, the valuer agrees with the purchase price about 98% of the time.

 

Yes, you do not have to go through if not signed up, let me know if you find a lender that insists on giving out money with no signed docs

 

Bingo - most lenders won't hold it against you if you don't proceed with finance.

There are a couple lenders which will charge a fee if it does not reach settlement, but that's mostly third tier/bad debt related lenders.

 

thanks everyone @Peter_Tersteeg ,@Terry_w , @Jamie Moore @Colin Rice
Its all good now. rolled back to pre approval. have 60 days . now I have a new question about house and land package? how does this work? land settles first then construction loan?
my scenario would be land settles in June 2017. then I wish to construct in 12 months. now I will be going with a different broker this time. but I thought I ask here for some insights so that I am more informed when I speak to broker.
will the initial application be land only amount? or I will have to provide quote from the builder at the same time but lender will settle land amount first then construction?

 

thanks Corey

 

Do a pre approval for the land and house together. Get the land contract. Get the building contract. Do the valuation and formal approval for both together. You can just get the loan for the land if you like but this leaves you open to risks. Risk that the building contract has more site costs than you expect. Risk the bank valuation on the building and land contract difers from the purchase price. Risks that your financial position or the lending environment changes between buying the land and building. It's much easier and simpler just doing the two together as a package.

 

'Package' doesn't mean it has to be the same people building your house as sold you the land. It can be two different contracts with different vendors/principals/builders. It's just that you have both presented to the bank at the same time.

 

Any reason why you want to settle land with an outlook to construct in a year? Land does not have the benefit of a tenant (unless your real creative with AirBNB). So your holing costs on purely land are considerable.

@tobe i could be wrong but you can't get pre approval for a house not being constructed for another year?

 

You can get pre approval. But most will expire in 3 to 6 months

 

What terry said. It happens a fair bit actually. Builders are delayed starting for one reason or another and finance expires.

 

you are right. I will be doing that.

 

Lol.. I would love to put out some tents and air bnb them. obviously after dark so that the estate doesnt find out
anyway going for house and land together , still have time plenty time though.

 

right on. before purchase they said land will be settled in June 2017, now looking at september 2017. sighhh

 

Dig a small hole, pour some water in it and promote it as having 'water views'.

 

I don't want to scare you, but their updates around April and may next year are the ones to watch. Till then it's guesswork.

It's amazing how the sales person tells you one date and then the date changes as soon as you have entered the contract.

 

Liberty wouldnt use a freehold block worth around $160k for security recently.