Given the situation that we are very interested in living in a house in Cherrybrook and our max loan borrowing capacity of 1.1m don't allow u to get any 3~4 bedde house there, w are thinking to buy a land (under 1m) and build a house. My understanding is we will get separate construction loan for building this house and its not from then share of our ppor loan borrowing capacity of 1.1m? How does that construction loan works? What do you guys think about this approach? Any pros, cons...?
I have commented on your other thread about Cherrybrook. How about renting at Cherrybrook and use the money to buy an IP somewhere else?
I'm not sure what you mean by 'and it's not from then share of our ppor loan borrowing capacity of $1.1m" If you find something under $1m, let's say 900k then you will still only have $200k worth of serviceability to construct a house with. If the serviceability is what has dictated your $1.1m limit. I wouldn't cut it that fine though as you can't guarantee that someone will lend you the additional $200k once you take on the $900k worth of debt. I have no idea what prices of land are like in that area though. It would be better to go for a $700k land
If the loans are to be owner occupied loans, then your borrowing capacity won't increase by having separate land and construction loans. If you're getting a land loan with no evidence of constructing, some banks may even reduce your capacity as you still need to live somewhere else while holding that land loan. The only way your serviceability could increase is if the proposed rent on the property you are building is higher than the rent on the place you will be living in - if you choose for the build to be an investment. Even then it would need to be a significant gap between the proposed figures as the apra changes have tightened things up.
Investment Portfolio’s monthly returns PFI provide our clients the opportunity to receive income between 5% to 7% per annum with distributions paid monthly. We provide the research to ensure your selections achieve the goals. This is the value of advice. » Contact us today