Commercial loan required on duplex + studio build

Hi friends, has anyone else had issues with this?
Bank BDM called me earlier today saying that credit has reviewed my plans for a duplex and 20sqm studio development and is deeming it a commercial development (or similar) as there are 4 dwellings on plan. BTW the studios do not have separate titles, water, a fence dividing. they are not a granny flat either, they are more or less an outdoor study!

should i be worried or is the bank just being incompetent again?

 

Could you call the studio's a shed? Stretching it to call the studio's a 'dwelling' in my opinion. Sadly it's only the banks opinion that matters though!

Which bank are you dealing with?

 

Credit are looking at this development as 3 dwellings on single title and the lender's max number of dwellings on a single title is 2. Is the lender CBA? Westpac?

Although its a small dwelling - the studio is still considered a seperate dwelling.

You need to use a lender that allows for more than 2 dwellings on single title, RAMS , Bankwest, Dragon, CUA, NAB, etc.

 

I could call it anything? I actually got back to the BDM and told her it was a study. the only other thing in the studio is bathroom and shower. (no kitchen or separate bed)

 

Hi Shahin,
I should mention that this is a CDC development, so in my case I have 2 separate lots. technically it is 2 dwellings per lot..does this help?

 

Is does but the question is - is the subdivision prior to after construction?

If its prior then sweet as bro (which it sounds like it is).

 

indeed it is land was subdivided prior to my development approval..
btw this is westpac.
thanks mate

 

Why not just split it up against 2 lenders?

 

sounds like a worst case scenario.. im trying to work out why firstly, hoping the bank has overlooked details..

 

Sometimes they'll look at it as one development regardless, I had this issue with NAB too at one point.

Terry's idea is a good one. If they insist on treating the whole things as one development, do one with WBC and the other with someone else. Or just go to a different lender completely, RAMS will do it. Which is funny b/c WBC owns them

 

Then no issues doing this under residential lending - you just need to handle hold them and explain what I noted above.

 

Bumping this.. my westpac BDM got back to me today saying despite my comments, they are still flagging my development as a "non-specialised commercial" loan, if i am to proceed i need to change to this loan type and fund a $1,100 valuation fee.. i am absolutely furious at this stage as i cannot get through to the valuers. they are not separate units/dwellings !! my question now is: 1- what is involved with this type of loan? is it a higher interest rate etc? 2- what else/who else can i speak to or do to get through to them???

 

Re-read your thread - alternatives have been given.

If you stay with WBC, it will be a commercial loan, higher rate, higher val fees, shorter term which = higher repayments, lower LVR.

 

Alternative was always the last resort (which by the way is looking more likely now). I wanted to exhaust all avenues first... shame though, i have all loans consolidated and sorted with WBC.

 

By consolidated, do you mean cross collateralised? If so, this is a blessing in disguise.

 

lol im not sure what you mean by cross collateralised..? too big a word for me
I mean to say that all loans are reflective of asset cost base. eg - 123 smith st cost base is 1m then my loan amount reflects that number. 456 john st has a loan of 2min with the same arrangement..

 

Yes you are all crossed up - meaning all your properties secure all your loans. This is a high risk and potentially very expensive structure, so I would get this straightened out ASAP before you do more lending, otherwise you may find it's not possible.

Have a search on the forum regarding the risks - in a nutshell, lots of cons and very few pro's.

You can most likely keep your deals at WBC and just rejig the loans and securities to be stand alone, for eg 123 Smith St securing only the loans for Smith St and not also the loans for John st, or any others you have.

 

Yeah, you want to take this to someone else.

Even not crossed, I would not use the same lender for everything.

Jess is right, blessing in disguise x 10

 

thanks Jess, I still dont fully understand but im going to do some more research into this. thank you all for your constant contributions to this forum.

 

Thought ill provide a little update here on this duplex + studios development application with WBC. I have engaged a broker to start looking at other banks that could fund me the project but quickly ran into an issue. my current security is fixed rate..
In parallel i was able to negotiate with WBC that they treat this construction as residential under but under 2 conditions. 1- 70% LVR and 2- i fund the valuation. (1500-2000 cost)

I need help with how the 70% may be calculated.. is purely based of the valuation of the finished product? is it rental also or a combination of both?

some stats on the development.
current mortgage: 592k
construct costs: 676k
possible val: 1.4m (worst case)
rent quote: 1600 p/w

so given the above stats, would i be able to fully get the 676 from the bank @ 70% LVR?

cheers in advanced..