Current loan & construction loan

Hi all,

I am currently in the process of doing a knock down rebuild on a piece of land I own outright.

I require a loan for the construction of the new residence
I also currently own a 1/4 of another property with my family which has a current mortgage however a family member is currently residing in this property & paying the mortgage in lieu of rent & I therefore do not make repayments.

Can you tell me what the impact of the current mortgage will have on my borrowing capacity for the constriction loan?
Will I still be responsible for 1/4 of the current mortgage in the lenders eyes?

Thanks

 

With most lenders, they'll consider the total mortgage debt (total) on the property in your liabilities/expenses. They probably won't include any rental income as its not been coming in.
In short, it won't be good.

There are a few lenders that will apportion the total debt to your share (on the top of my head, St G, ME, AMP i believe). Your borrowing power is likely to be greater here. By how much, will depend on the size of the debt on the property.

As a first step, just run your borrowing power across the board. If you need a little bit of extra gas, you may need to be more selective on lender choice. The unique features of your situation will mean a greater spread of borrowing capacities between some lenders.

 

With this current loan our income to debt ratio is quite low as this loan would take up a large portion of our income however I have never made a repayment on this loan as it has always been my family member making the repayments in lieu of rent while she resides there as an owner occupier. I am however on both the title & the loan itself.

If it is the case that the lender will consider my repayments to be 100% of the actual repayments then it will be near impossible to get a construction loan based on our income.