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Residential construction finance - Prepayment

Discussion in 'Property Finance' started by wombat777, 24th Sep, 2016.

  1. wombat777

    wombat777 Well-Known Member Premium Member

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    On a High Altitude Safari
    I'm looking at future options for financing a 3 townhouse development. Ballpark construction finance required is $750k based on an 80% lend.

    Is it feasible to prepay 12 months of repayments and use this to achieve serviceability? Intent is a fixed-price and duration construction contract.

    Not intending to sell if possible so prefer not to go down the commercial route.
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Melbourne, Nationwide
    You can't show serviceability simply by throwing a whole lot of cash at it. The question will be how do you service it after they're finished.

    You can use the anticipated rental income as part of the servicing calculations. The hold costs during construction is covered by your savings as a mitigant, not as servicing.
     
    Iamnumber5, Terry_w and wombat777 like this.
  3. Simon Moore

    Simon Moore Residential & Commercial Mortgage Broker Business Member

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    4th Mar, 2016
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    Location:
    Level 6 250 Queen St Melbourne VIC 3000
    Three townhouses can be done at 80% with Advantedge (owned by NAB), they have a very favourable servicing calculator if you have a bit of existing investment related debt.

    A client of mine just started a three townhouse development, he had ~$3m debt with Macquarie and had totally maxed out his borrowing power, and he received $950k from Advantage for the development and still had some borrowing power to spare!