Development finance and NCCP

Discussion in 'Loans & Mortgage Brokers' started by AllyJ, 13th Jun, 2019.

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  1. AllyJ

    AllyJ Member

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    Hi all

    I had a chat with NAB about development finance for 6 townhouses on a block. Currently is in my own name with an investment loan in my name personally at 80% lvr.

    The borrowing entity would be a company, which would do the development.

    Bank indicated that they could not fund under resi because too many units, or under commercial because of NCCP as the block is owned in personal name.

    Any thoughts of how to do this aside from wearing the stamp duty to put the block in another entity?

    cheers!
     
    AllyJ, 13th Jun, 2019
    #1
  2. Terry_w

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

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    owner appoints a company as bare trustee.
     
    Terry_w, 13th Jun, 2019
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  3. Simon Moore

    Simon Moore Residential & Commercial Mortgage Broker Business Member

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    Talk to a mortgage broker that has experience doing small developments, there are lenders that would do that every day of the week assuming everything else stacks up.
     
    Simon Moore, 13th Jun, 2019
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Nab like 99 % of lenders will want this under commercial due to the commercial risks involved.

    The biggest issue with this type of project in the current market is the end val, which is subject to a typical hair cut of 25 % because they are all on one title until completed

    So what looks like a simple 80 % lvr ends up being 65 or less

    Recently had a sour scenario with no real option where client had to stump up 48 k in LMI, literally just until we have end titles registered......

    ta
    rolf
     
    Rolf Latham, 13th Jun, 2019
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  5. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    We have done a guide to development finance - this will answer some of your questions:

    Development Finance Guide

    Essentially anything over 4 unit construction is commercial.

    Doing the development in an individual name isn't an issue (well from a finance perspective anyway).

    Your potential issues are going to be:

    1. Experience - if you haven't done previous projects of the same scale then this will rule out a lot of lenders

    2. Cost and time - factor this is in as commercial development finance is a lot more expensive than residential. Its also cumbersome, .e.g you need to do a QS on each builder claim compared to 1/2 in the residential world

    3. LVR/GRV - do you have enough contributions for any shortfall

    4. Servicing - this is a big one which may lead into pre sales.
     
    Shahin_Afarin, 13th Jun, 2019
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