Construction loan basics

Hi experienced developers,
Could you kindly shed some lights on A,B,C,D,... of financing a construction loan?

Straight forward buy: Buying a $600k land with LVR 80% or 90%

1. If we wish to subdivide and build a house on each lot, do we seek bank's approval before filing DA?
2. Do we even tell the bank that we intend to subdivide before the loan approval to purchase?
   
3. Would the bank revalue potential 2 lots once DA is approved? And give us more $$ for construction?
   
4. About construction loan, do we cough up the whole 100% construction cost via a personal loan or other means? Or Banks value the estimated end value and lend you %? What % do they usually give as construction loan?

Basically trying to work out roughly how much cash we would need to front up for deposit, DA fees, construction cost, holding cost, contingency etc. on a $600k property buy with subdivision potential.

Thanks heaps!

 

1. If the land is mortgaged yes
2. no
3. banks valuers value depending on market values and it may result in a higher valuation. whether they would lend more depends.
4. you can generally borrow 90% of the contract amount.

 

Hi Terry, on point 4, 90% of the contract amount could be borrowed.
Do we have to repay bank any money (e.g. when the land is split in half?).
What's your Tax Tip thread number please on this financing side for development?
Thanks,
Junie

 

The banks will be happy (maybe not unhappy is a better term) if you can service and your LVRs are under 90% (or 80%).

You shouldn't have to pay down any loans if your property is worth more. You may have to rejigg them on splitting the property.

See
Tax Tip 93: Subdividing Property and Deductibility of Interest https://propertychat.com.au/communi...-property-and-deductibility-of-interest.6927/