Construction Loan Query

Hi all,

I have a random question I have always wondered about.

Assume you got approval for a construction loan today with Bank X. In a month you gave the bank the first progress payment for the slab and the bank paid that. Now its month two and you find a great home somewhere else, purchase it using Bank Y and rent it out.

1. Have you ever seen a case where Bank X will do a reassessment half way in the build?
2. Is there a chance Bank X will stop the build as liabilities have increased i.e. new home purchase?

Note when you got loan from Bank Y, you counted the whole construction loan towards assessment even though the build was at slab stage.

In my opinion its actually more risky for Bank X to stop build lol

Thanks

 

Once a construction loan has been approved and settled they don't reassess it no
Any lender you apply with after the construction loan will always take the full debt into account as standard, no matter what stage the build is at, some will allow the proposed rental income towards serviceability and some won't (if building an investment property)

 

So essentially one can get more loans, credit cards etc (assuming they pass assessment) and the Bank that approved the construction loan cant do a thing/wont know because construction has started?

 

Correct, in the scenario you posed the loan has settled. What would be the benefit of it to the bank to do that? They don't like having a partly built house for security.
It's up to the new lender to ensure serviceability for any further debt being applied for.

 

Agree thanks alot mate

 

There is no reason for any reassessment once the loan has settled.

I could have settled a loan tomorrow and lost my job 2 weeks after, doesn't mean the bank will repossess my home.