Mortgage for house plus construction of 3x townhouses

Dear All

I am hoping to get some help finding a bank to fund my little development project located in inner Brisbane. I purchased the site in my personal name and have received planning approval to construct 3x townhouses in the backyard, plus cut and slide the charachter house. The house is current my PPOR and will continue to be after the build. All 4 dwellings will be in a body corp. At the time I bought the house my bank said that they would be able to fund this. They have since walked back on that advice and I am not having much luck finding another bank to fund it as a mortgage. I can find plenty of private funders but they cost a lot more and lend at a lower LVR. If anyone can point me in the direction of a bank that will fund this sort of project I would be eternally grateful!

Thankyou

 

Plenty of lenders will fund a 3 unit development.

The question is why did your existing lender reject the application? It's possible that the initial advice you received when you purchased the property was a general, it's within their policy. Today that lender might still be able to fund 3 unit developments but you may not be meeting their overall serviciability policies or something else.

Your best option would be to consult a mortgage broker to give you some clear advice on this in the context of your circumstances.

 

This is a area where an experienced broker helps. Lender policies vary a lot. Lack of experience is a blocker but some lenders may class this one as a resi (not commercial) loan. This a 4 lot site not 3 due to the need to change the land and move the dwelling. Many lender policies governing new builds are complex and vary. Some will stop at 3 and others 4. Dont assume 80% LVR.

Its possible the "home" is not a CGT main residence and cant be. It may or may not be later....Tip : The existing dwelling and land wont continue to exist.

 

Try Heritage.

 

Gents, thanks your quick reply. Feedback from my current lender and the others I have consulted directly has been that 4 dwellings is outside their policy for resi lending. Most have been happy to do it as a commercial lend but again lower LVR and higher cost, and also can't lend to an individual so need to set up an entity/etc. I think I am OK for servicability and property experience, it is just the policy on the number of dwellings that is tripping me up at the moment. If I need to involve a broker to find this bank then so be it, but hoping I can resolve this myself.

Thanks for mentioning CGT, I am getting seperate accounting advice.

 

Before we provide you with a solution or a lender. Why didn't your bank approve it ?

 

They changed their lending policy and will only lend for max 2 townhouses.

 

Depending on LVR, westpac group, ANZ, heritage comes to mind.

 

Thanks Tony. Westpac and ANZ have both told me that 4 dwellings on 1 title is outside their lending policy - have you had a different experience? If so perhaps I need a broker to get cut through.

 

Even though you are building 3 units - you need a lender that does 4 unit construction lending as all 4 units will be a single title.

Many lenders do not do 3/4 units construction lending under their residential policy and its too small of a project to do it under their commercial lending product. You wouldnt want to do it under commercial lending anyway as its too expensive.

You want to do it under residential lending.

So to answer your question - you are looking at Auswide who will be do max 70% LVR. Auswide have good servicing and a pretty good overall lending policy.

Westpac and St George will do 4 units but depending on the strength of the application you are looking at around 50% - 60% LVR. I wouldn't look at them unless you really need to use them (policy niche).

Bankwest will do 80% and are excellent in this space.

BoQ/VM will do max 60% - they aren't the best lender in this space.

Heritage will do max 70% LVR lending - ok in this space.

The other big thing you need to think about is the valuation - its going to be in one line valuation so as a rough guide you need to shave about 40% off the end valuation and that is what the lender will lend you.

This thread may help you with some high level information on development lending:

Development Finance Guide

 

thankyou Shahin, that is fantastic advice. I haven't yet spoken to Bankwest, sounds like I need to. I will speak to them ASAP.

 

Instead of continuing to stumble around, why don't you give an expert such as Shahin a call?