construction loan

I am thinking of subdividing and building a 2 bedroom unit if I get an approval for a construction loan end of the year.

Some say I need 20% deposit and others say you can have 10% deposit so I am a bit confused. I haven't spoken to any brokers yet as I am still saving for the deposit so I thought I should ask SS members first so I know how much I have to save before approaching a broker.

Could you also use a guarantor for construction loans?

Also my understanding is 200K is approx how much you would need to build a 2 bedroom unit in Victoria?

Many thanks!
 
The costs of dividing eg surveyors, council fees, water fees etc you usually have to bear yourself, either with cash or with equity in existing property(s)

Construction loans will normally give you 100% of costs of the construction using the security in the finished product as well as in the land its in.
 
Are you doing the subdivision first and then the build or other way around?

If you are subdividing first and then constructing then you should have no issue when it comes to the valuation.

If you build first and then subdivide then the valuation may come in slightly lower.

Depending on the lender - you may be able to order an upfront valuation prior to submitting the full application.

Heaps of lender can accommodate this scenario but some do it better than others (ANZ is an example of a lender that doesn't do it so well).

Also remember that you will need to get the permission of your lender before you subdivide the block (if that is what the DA states).
 
Hi Pvale,

Assuming you're going to subdiv prior to building, depending on lender you can get up to 95% based on the new blocks land value + build contract.
 
main caveat being - will it be on its own title?

That is what i am hoping for. Sorry i am completely new to the whole thing, would this be a major problem in financing re: own title?

Also would it be too early to speak to a broker to find out how much equity i have and what my borrowing options are when i know it will take me almost 6months to a yr to save up for the deposit?
 
you may not need to save depending on the banks valuation and how much you already owe. It will however still take some months to get planning and subdivision done, and getting a build contract prepared.
 
you may not need to save depending on the banks valuation and how much you already owe. It will however still take some months to get planning and subdivision done, and getting a build contract prepared.

Thanks tobe

Do I need to inform the tenants while im going through the planning permit and subdivision etc?
 
no legal obligation to inform tenants . (as long as you don't terminate the signed agreement)

But you will need to inform them if you need access to property.
 
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no legal obligation to inform tenants . (as long as you don't terminate the signed agreement)

But you will need to inform them if you need access to property.

And you will need access to the property (draftsmen/architect, soil testing.etc).
 
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