Construction Loan - Assessment

Discussion in 'Loans & Mortgage Brokers' started by [C], 5th Nov, 2018.

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  1. [C]

    [C] New Member

    Joined:
    5th Nov, 2018
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    Location:
    Sydney
    Hi all,

    I'm new to this forum and looking for recommendations on how the construction loan assessments are conducted by the banks.

    Our current outcomes are:
    Primary house
    - Purchase price - 1.5m
    - Loan amount - 1.25m

    Investment property
    - Purchase price - 730k
    - Loan amount - 590k

    i'm looking at a construction loand and what the top up value i will need to come up with in order for me to do this.
    Current, 4 bedroom property around the area ranges from 1.65m - 1.95m.

    What is the formula i should use to perform the calculations?
     
    [C], 5th Nov, 2018
    #1
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    14th Jun, 2015
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    Gold Coast (Australia Wide)
    Hiya C

    Welcome to property chat

    Sounds like you would be well served talking to your banker or your broker specifically, because there are a number of sub issues such as valuations contract prices income to debt ratio et cetera that may affect what you can do

    thanks

    Rolf
     
    Rolf Latham, 5th Nov, 2018
    #2
  3. Redom

    Redom Mortgage Broker Business Plus Member

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    Location:
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    Not certain on the exact question. If its regarding how much capital you'll need to contribute, generally for a loan like that you'll be best of with a 20% deposit. To calculate your existing equity, multiply your existing property value by 80%, then subtract your existing loan amount. You'll get to your 'useable' equity from there. This is your theoretical 'equity' available to use from your existing properties.

    You'll then need to demonstrate affordability - that is, you have the borrowing power available.

    This is all standard and part of all loan assessments.

    If you have someone specifically look over your scenario, they may be able to provide the individual advice you're looking for and see whether something like this is achievable in your situation.
     
    Redom, 5th Nov, 2018
    #3
  4. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    I think your question is how much will the bank lend you?

    The valuer will give you 2 valuations figures on the report - one will be the actual end valuation once you have constructed the property and the second being the land plus construction. The lender will generally lend the lower of the 2.

    Are you doing the construction on the owner occ or the investment? What is the approximate construction amount and what is the estimated end value once constructed?
     
    Shahin_Afarin, 5th Nov, 2018
    #4
  5. Lindsay_W

    Lindsay_W Well-Known Member

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    There is no formula to use as such
    Lenders use an 'as if complete' or 'Construction' valuation to determine how much the property will be worth once it's completed - this depends on current market values for similar homes in the area, based on the specs of your build.
    If you just want to get an idea of what similar properties are being sold for in your area you could take your build quote, plans, specs etc. (assuming you've got one already) to some local real estate agents to get an idea what they think they it will be worth but any lender is going to want their own valuation completed to use for finance purposes anyway.
     
    Lindsay_W, 5th Nov, 2018
    #5