Construction loan basics

Discussion in 'Property Finance' started by jsoe000, 6th Jan, 2017.

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  1. jsoe000

    jsoe000 Well-Known Member

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    30th Jun, 2015
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    NSW
    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!
     
  2. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    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.
     
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  3. jsoe000

    jsoe000 Well-Known Member

    Joined:
    30th Jun, 2015
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    Location:
    NSW
    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
     
  4. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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