Borrow for land 1st then borrow again for building house?

Hey guys,
I just found this forum and I'm looking towards building my 1st home in Point Cook. I've found a piece of land that I like at the and I'm about to put a deposit on it. However, my earning capacity at the moment doesn't allow me to build my home and cover my rental place the same time. I'd have to wait for my other half to come over next year. So the difference between getting the land title and construction should be roughly around 6-7 months. I have saved up 20% deposit and going to take a loan for the remainder of the land.

- My borrowing capacity is currently 280k but I'll be taking only about 135k. Will I be able to take a loan for the land now and then take a loan again later for the house?

- Would my FHOG be affected at all?

- Should I borrow from bank or non-bank lenders? Bank seems to have higher interest rate advertised on their websites.

And lastly....I'm scared. I'm doing this all alone now and would like to get some advise from you guys.

I am a mortgage broker who works with a builder in the area, so my answer isn't exactly unbiased.
However,I would suggest you buy the land and construct now. If your serviceability with one bank isnt enough, there is usually a way to do it with another. There are a couple of banks who dont need you to take account of the rental you are paying in serviceabilty, but can take into account the rental you recieve, thus increasing your borrowing capacity.
With this strategy you wont be able to claim the First home owners grant at settlement, but if you then decide to live in the property, you can apply directly to the state revenue office later.
My main argument for building now, is if you dont, you will be paying interest with after tax income, for the pleasure of watching the grass grow on your block. The block may increase in value, however if your strategy is to buy and hold, this wont be much advantage.
Hi eng,

I'm also building in Point Cook.

Will I be able to take a loan for the land now and then take a loan again later for the house?

Yes you could take a loan for the land now and then apply for a seperate loan for construction later on. Actually before they will give you unconditional approval on the construction funds, the plans need to be council approved and you have to have the building contract etc (at least in my experience). I have a loan for the land and a seperate loan account for the construction and I had to do things this way as the approved plans etc were not available at the time of purchasing the land. I'm hoping that at the end of construction they will put everything into the one loan.

Just keep in mind that if the bank decides later on that they don't want to lend you the extra money for the construction, you will be in a difficult situation as the bank will have the title for the land. Therefore you can't just easily go to another lender to get the contruction funds - you would have to refinance the land as well.

Regarding interest rates with banks, my loan is with ANZ. Interest rate is 7.37% with the breakfree package - (might be higher if your loan limits are < $250,000). There is a progress payment fee of $250 (only paid once during construction, with first progress payment). They do not charge for valuations, of which several are required during the process. Not sure whether other lenders charge for valuations. One problem with the ANZ though at least in my experience is that they are always late paying the progress payments so check for late payment charges in your building contract.
Thanks for the replies guys. Tobe, if I were to borrow more, wouldn't it just make my repayments higher every month? My rent at the moment eats up almost a third of my income. I don't want to lose that plot of land as well because of the location.

Everything is still a little surreal as I've just started looking last weekend. I'm yet to walk into any bank and inquire about finance. I think I'll do that this afternoon and try to work out my borrowing power and what I can afford in repayments. I'll try to build if possible.
Yes it will make your repayments higher, however you will then offset the higher repayments with rent you will recieve from the property. It can be further offset with negative gearing if applicable. Chat to your accountant about this. I dont want to tout for business on this site, as it is not the reason I post here, bt I am happy to go through your options lending wise in person if you like.