Subdividing during construction

We are 4 borrowers constructing two dwellings on a block that we will subdivide. We obtained plans and permits, and have begun construction because we have sufficient equity. Total GRV is approx $4m.

CBA sent in a valuer, who has agreed with the GRV and then applied the discount due to the in one line valuation. They've knocked approx 26% off the valuation, and they're lending us 70%, which equates to 53% total LVR. Obviously we'd like an LVR a little higher so that we're not tying up all our equity while we build.

Since construction is underway, council have told us that they would approve a subdivision request. If we were to subdivide the properties now, would we have an easier time getting a loan of 70%-80%?

Any insights appreciated.

 

Details about the build.
Stand alone or party walls?
Individual building contract or together?

 

Party walls. Individual building contracts.

 

Party wall, then still be in-one-line unless signed off.

Policy....

• Where a customer is building 2 dwellings on adjoining titles with any of the following, then the entire development must be controlled by the Bank and the two dwellings valued in one line:
  • Adjoining walls.
  • Single building contract.
  • Single development / building approval.

 

What's the concern around tying up the equity during build, it's started hasn't it?

 

Building has commenced.

 

Then assume the loan is also setup?

 

We have a loan on the land, an approval on the build, but for an LVR lower than we’d like.

 

That’s what I was afraid of.

 

Difficult to refinance a partially completed building with added difficulty as Brady says.

You prob best to do it then split and borrow extra if need be. Though it could be better to get max possible if owner occ etc

 

Do you have any soft costs in the contract which the bank are not lending on like landscaping at end etc? Could you take those out and roll with subdivision now so that you are ready with titles at end and can then borrow against equity for landscaping or some finishing costs?

 

We do, there are a few we could do as owner supplied.

The balance we have to strike is to make sure we don’t devalue the property as a result or make it less rentable. For servicing, the broker has put this through as an investment loan.

 

Is this standard for most of the majors? What would be chances of Residential lending and 80% plus LVR for 2 dwellings with DA approval to subdivide but titles not registered? Goal would be to include subdivision costs in build contract.