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financing a build - how ?

Discussion in 'Property Finance' started by user355241, 25th Sep, 2016.

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  1. user355241

    user355241 Member

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    scenario (yes im gonna see a proper fin planner)

    house 1. 200 debt, val 325
    house 2. 180 debt, val 275

    plan is to knock down house2 and build a new dwelling on it for ppor. theyre both IPs at present.
    am thinking the only way possible, is to pay down house1 and re-borrow against it some of the construction build cost, and then put the remainder of it on house2.
    theres gotta be a better way to approach this?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Fin planner is not needed for this it is a broker question.

    Just borrow 80% if the land vale and the construction costs.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Financial planners can't give advice on how to lend money.

    It's simple enough to take a construction loan to finance both builds. It's probably a lot simpler and less risky than trying to use equity loans for the build.

    Paying down non deductible debt is always a good idea. If the PPOR might become an IP in the future, then doing it via an offset account may be the more appropriate structure.
     
  4. user355241

    user355241 Member

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    thanks for quick reply.
    the build will be say around 800k for the home.
    i wont be able to borrow enough?
    i only want to knock down h2 and build a new dwelling on it and it will be a ppor only. the replies hvae confused me now
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    How much is the land worth and how much for the proposed building?

    x this by 80% or 90% and that would be your max loan without using other security.

    If you have existing borrowings against this security then deduct this from the max loan and that is your max new loan for the build.

    Keep in mind you still have to demonstrate serviceability.
     
  6. albanga

    albanga Well-Known Member

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    Hang on a second. Your saying it's currently worth 275k now and has a house.
    I'll take a stab say it's quite direlict so let's be generous and say 50k for improvements.
    That leaves a land value of 225k.

    You then went to spend 800k on a build!
    If the land is only worth 225k then this would be a gigantic over capatalisation. There is no way the value will come in anywhere near the land + construction cost.
     
    mrdobalina likes this.
  7. Joshwaaaa

    Joshwaaaa Well-Known Member

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    whats the finished value going to be? $800k build for ppor would be a very very very nice house