Deposit confusion

Discussion in 'Loans & Mortgage Brokers' started by Martinez22, 19th Apr, 2020.

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  1. Martinez22

    Martinez22 Well-Known Member

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    Hey if any brokers can please clarify. I've got a brain blank with this one.

    We have a block of land, worth around 170K, the loan on this is 130K so LVR is below 80K.

    We would like to re-finance this and borrow for the construction (around 185K), estimated final loan 315K / estimated final value 400K - so final LVR just below 80%.

    Do I need to provide the bank 85K as a deposit (400 - 315) or is the deposit the security?
    I can't figure out if I need to pay a down deposit or not..
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You would need to keep the LVR to acceptable levels such as 80%
     
  3. Morgs

    Morgs Well-Known Member Business Member

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    It is going to be dependent on the end value - you will need a construction/as is complete valuation to determine what this is and therefore what deposit/capital contribution you'll require for the construction loan.
     
  4. Martinez22

    Martinez22 Well-Known Member

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    But lets say theoretically its all under 80%, is the 20% deposit coming from the security itself or do I have to come up with the 20% as a down payment to the bank?
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Land $170,000

    Build $185,000

    Total $355,000

    Generally 80% of this would be the max without LMI = $284,000

    You already have $130k owing on the land so $154,000 would be the max loan for the build.

    This would mean an extra $30k needs to be contributed from cash or other borrowings.


    End value $400,000 if the lend base on this the loan would be $320,000

    Less $130,000 = $190,000 so no contribution needed.
     
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  6. Martinez22

    Martinez22 Well-Known Member

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    Thank you so much !! It's all clear now
     
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