Serviceability and development

Discussion in 'Loans & Mortgage Brokers' started by Creamy, 20th Apr, 2017.

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  1. Creamy

    Creamy Well-Known Member

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    Ironing out my strategy. Is it possible to do a development if you're nearing your serviceability ceiling?

    Assuming you're doing a build and retain, or sell some hold some, and that you can do an equity release for soft costs and subdivision, wouldn't the subsequent construction or home loans still be assessed against your income?

    Am I right in assuming that development isn't possible unless you have significant serviceability left?
     
    Creamy, 20th Apr, 2017
    #1
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Commercially based transactions with a defined exit and a decent margin are usually not serviceability tested

    ta
    rolf
     
    Rolf Latham, 20th Apr, 2017
    #2
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  3. Creamy

    Creamy Well-Known Member

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    Does this only apply for commercial loans?
     
    Creamy, 20th Apr, 2017
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  4. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Yes only for commercial loans as they will look at the development.
    Smaller commercial loans with no presales etc will often still look at serviceability to ensure that you can make the repayments if you can't sell
     
    Westminster, 20th Apr, 2017
    #4
  5. goodtimes

    goodtimes Well-Known Member

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    How will rental income from the finished product be viewed for serviceability with resi finance?
    Do you still need to show serviceability during the construction period?
     
    goodtimes, 3rd May, 2017
    #5
  6. Corey Batt

    Corey Batt Well-Known Member

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    Generally lenders will look at finance based on the end debt value and rent so the fact that there is no rent during the construction period is not considered.

    There are some lenders are a little more finnicky with this and some will be VERY conservative with the rental value estimated unless the property is turn-key/able to be leased immediately once the construction is completed without any other parts of the construction being done with cash funds not attributed to the initial finance application.
     
    Corey Batt, 3rd May, 2017
    #6
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  7. MTR

    MTR Well-Known Member

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    I built a 4 townhouse development recently in Melb had an issue with servicing debt so went RAMS lo doc. This is another avenue but will need ABN number. Give them a call to find out what is required

    I recommend this product if you are stuck, you wont need to jump hoops and I believe best lo doc product on market today
     
    MTR, 4th May, 2017
    #7
  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Are you asking if a lender will lend you 100% of the dev + construct based on its future value ?
     
    Paul@PAS, 4th May, 2017
    #8