Loan refinance/consolidation query

Discussion in 'Loans & Mortgage Brokers' started by Joey2020, 24th Jun, 2022.

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  1. Joey2020

    Joey2020 Well-Known Member

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    Hi all,

    I had a scenario I need help with.

    Currently I have a land loan that is principal and interest and a construction loan that is Interest only during the construction period all with CBA.

    Once done it will be consolidated so it is principal and interest.

    Assume during construction I purchased another land which I am renting out now (interest only loan which rent covers repayments)

    1.When the Construction ends, will my loan automatically rollover to principal plus interest without assessment Assuming I’m going to stay with CBA ? This is my goal so I am not impacted by the new purchase I made.

    2. If I was to refinance the whole loan to another bank, I’m assuming I will be subject to assessment?

    Thank you so much
     
  2. Terry_w

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

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    going from IO to PI generally won't be reassessed, but changing lenders will
     
  3. Joey2020

    Joey2020 Well-Known Member

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    i thought so too, when you say “generally” have you ever seen it been reassessed before?
     
  4. Chris B

    Chris B Well-Known Member

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    1. Yes, once construction is completed, it is usually included in the loan contract that the loan will revert to P&I and there will not be an assessment.
    2. Yes, refinancing will require assessment by a new lender.

    Who is your land loan with? They will have included your current loans in their assessment to approve the land purchase.

    Are you receiving rental income on vacant land? This won't be accepted as income in their assessment.
    Is there any requirement to build on the land within a certain period? Lenders will want to know that you can afford to do this.
     
  5. Joey2020

    Joey2020 Well-Known Member

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    Sorry I should’ve been clear when I say I purchased a new land I mean a home sitting on a land that is being rented out.

    So just to confirm when my current construction finishes the loan will rollover to principle plus interest without any reassessment? Is that correct?
     
  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Construction loans are always interest only during the construction period, they then roll over to P&I (unless specified otherwise in the original application). There is no reassessment in this scenario, the original application was actually assessed based on the post-construction outcome.

    If you want to move to a different lender, that will be fully assessed by the new lender.
     
  7. David Han

    David Han Mortgage Lending Specialist Business Member

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    That is correct, once your final drawdown is completed, it will change to P&I repayment without any re-assessment.

    If you refinance to another lender, full credit assessment will be required.
     
  8. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    1 - yes, unless your construction loan portion was approved for a longer IO period

    2 - yes, any refinance will need to be reassessed, unless you wait 12 months ths and use ANZ simply switch.
     
  9. Lindsay_W

    Lindsay_W Well-Known Member

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    You'll be fine :)
     
  10. Joey2020

    Joey2020 Well-Known Member

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    thanks everyone for their help