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Subdivision - What point does your lender need to know?

Discussion in 'Property Finance' started by albanga, 15th Oct, 2015.

  1. albanga

    albanga Well-Known Member

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    Hey Brokers,

    I'm at the final stages of my subdivision and it just occurred to me that at some stage my lender is going to want to know this.

    Do I need to advise them before submitting to the titles office? For me this will be in about 20 days.
    OR
    Do I subdivide it first and then advise the bank so they can revalue and cross the securities?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    They have to produce titles so they can be cut in half.

    They will also need to do valuations and possibly reassess things so before submission to Land Titles.
     
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Usually conveyancer / soli will prepare the new titles and your existing lender will take both
     
  4. albanga

    albanga Well-Known Member

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    Thanks Terry and D.T
    So in my situation, given I am about 10 days away from my surveyor submitting all the required paperwork to council (all clauses in subdivision permit met) what is the logical next step?

    Do I touch base with the conveyancer now or my broker to advise the lender?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    lender
     
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  6. albanga

    albanga Well-Known Member

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    Thanks Terry, I'll get onto that now.
    Cheers
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Depending upon revaluation and outstanding loan balance, will the lender release one of the properties if the other can remain encumbered to cover the entire loan & lmi?
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    with NAB............. about 3 mths in advance can be good so they can arrange the consent.

    Awful process from the 1800s

    ta
    rolf
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Got to be careful from a tax perspective. This is possible, but make sure the loans are appropriately split.
     
  10. beachgurl

    beachgurl Well-Known Member

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    For the lender I used, I could determine the loan apportionment across the two blocks. I used CBA and they were pretty quick.

    To answer SNM I had no issues selling one off as the loan split I chose made sure their Val would stack up on the remaining block. Maybe see if you can get a Val first prior to apportioning if you want to keep as much debt in the remaining block.
     
  11. Brisbane04

    Brisbane04 Member

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    Hi,
    I'm almost finished with my subdivision thank goodness it's been a long and expensive ride but hopefully it will turn out to be fruitful. Council has ticked off all the requirements being done and has sent it to my solicitor for the preparation of titles. My solicitor has contacted the bank and has asked for consent to lodge the titles with the titles office. I was informed that this can take 3-4 weeks for consent to be obtained from the bank, and once this has occurred it may take a further 3-4 weeks for me to get the title for the block. I've had the block up for sale for 6 weeks now. I've asked that my solicitor to send the request to my personal banker so I have a focal point to follow up on the progress of the consent. The land should be all in my name with no mortgage on it. The bank will revalue the house and hopefully it will still have enough equity in it to keep them happy to give consent otherwise something will need to be worked out.
     
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  12. albanga

    albanga Well-Known Member

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    I did actually have the lots valued based upon subdivision about 6 weeks ago so imagine the lender (ANZ) would still be happy with those vals?

    The loan amount is 480k and they valued the new lots at 560k (includes the existing house) and 350k which is the vacant land so total 910k = LVR at 52%. So from my understanding it leaves us just short of being able to release the vacant land as our LVR would then be 85%. I do however have enough cash in the bank so could if required? But again from my understanding in this situation crossing the properties is not a big deal (it is our only property each and not used for investment purposes)

    I am not too concerned though as we will almost immediately be selling the existing lot with the house and both my brother and I will pay out our loans in full leaving us with the unencumbered land. Ill then buy that off him and build.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    might as well uncross it now, otherwise you will have to when selling - and ANZ will control the money on sale if crossed.
     
  14. albanga

    albanga Well-Known Member

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    I made a mistake, the loan size is in-fact 504k.
    So how could I uncross it now?

    It is my understanding from a previous post that crossing securities when subdividing is quite the normal. Or can the banks portion some of your debt to each property?

    The other alternative I suppose could be releasing the vacant block? To do this our current loan is 504k and the existing house lot is valued at 560k. If I dropped my loan by 56k with money in my offset then it would reduce the entire loan to 448k (80%) and then that way when the new titles are issued only the mortgage would need to apply to the existing block?
     
  15. Be Developer

    Be Developer Property Developer Business Member

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    @albanga

    Once you get plans stamped from council (Plans and Papers), you can send original stamped plans(rolled not folded) to lender/mortgagee for their consent.

    Lender will sign of on Papers (if all boxes tick), then you can submit it to title office and have new titles issued.

    Your mortgagee/lender will produce existing title to land title office and will collect new titles upon successful subdivision.

    Loan split and re finance can be sorted with broker/banker!
     
  16. albanga

    albanga Well-Known Member

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    @Be Developer

    So when you say stamped plans are you referring to the subdivision permit? Or once I have satisfied all the clauses of the permit and my surveyor submits it to council, is that when you mean stamped?

    I am just trying to be pro-active so that there is as little delay as possible once I have satisfied all clauses of the permit.
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You wouldn't want to be normal would you? Normal people cross collateralise in any case, but those in the know don't.

    To avoid it you just have to split the loan and have one on each portion. If you are going to be selling and paying out both then it won't matter if you get the taxable portions wrong. If you are going to keep one the try to get the portions correct.
     
  18. Be Developer

    Be Developer Property Developer Business Member

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    Yes.