Construction Loan!!

Hi

Just wondering how does construction loan works. I am planning to knock down my PPOR and borrow $250K. Current value $530K. Loan $350K

How long do i have to wait.

My others IP;s are at LVR 80%.

Thanks in advance.

Cheers
 
How long do you have to wait? Do you mean until the house is completed? If so you would need to find that out from the builder.
 
How do they work?

Progressive draw downs, as each stage of teh building is completed the lender will draw down the funds and pay the builder.

So you loan will grow or get bigger in stages, duing this period the loan will most likely be I/O.

That is in a nutshell.
 
and depending on the serviceability the lender will lend a percentage of the completed valuation of the works.
What do you think the place will be worth with the new house on top?
 
How long do you have to wait? Do you mean until the house is completed? If so you would need to find that out from the builder.

How long do i have to wait before banks will give me the loan.

Current Value - $530K
Current Loan - $350K

How would i go about borrowing another $275K.

Do i have to wait till the property value goes up. If so how long.

My others 2 IP;s are at LVR 80%.
 
RE the current $v willl be based on ie, 300k land and 200k building, so if the house is gone then the land value is only left, lets say $300k ?

So the finance folks estimate what the new home and the land is worth they look at comparable sales in the area so if you spend eg , $275k and the land is already $300k the value might come in at l;ets say ?? $650 when compleated .

NOTE : the construction loan will not cover the payments , soft furnishings , and the land scaping in most dealings i have had , so you might want to cover yourself for these , also not covered are builders extra's seen or unseen so stick to the plan or expect to be looking for some extra $$$.

The builer invoices for a deposit throught you to your bank, the work starts then the other sages are inspected at there specific intervals, untill the last one then you get the keys at hand over, OK!

The drawdowns in my experience work like this .
1, builder invoices the bank . it sits on his desk for two days.
2, the clerk gets it , it sits on his desk for a day or two.
3, the weekend comes and goes.
4, the valuers secratary recieves it , and then gives it to the valuer, and it sits on their desk for a day.
5, the valuer calls and makes an appiontment to visit the site with the builder , ie 3 days.
the valuer meets the builder looks like he/she has a clue :rolleyes:and ticks a box, goes back to the office , and passes it to his/her clerk.
6, the weekend comes and goes.
7, the valuers clerk faxes it to the bank clerk, and it sits on the desk for a day or so!!
8, the bank manager gets it , somtimes calls the client , and releases the funds to the builder.

This happens about 5 to seven times "GOOD FUN" not....
excluding annual leave and long weekends, the builders calling you and asking whats going on every day and you get to pull your hair out.

and by this time the builder gets to the next stage and you do it all again:)
 
Also say to build - you'll owe 275+350 (at least) so thats 625k debt against a proposed end val of what - 600?
You'd be looking for a hell of a good CG on that build, and hoping the banks take it into account.
 
You say the property is worth $530 now.

How much will the property be worth with the new house on it?

What will be the cost of constructing the new place?

Basically the lender gets an "on completion" valuation done.

say on completion the property will be worth $600k and you are borrowing 80%, then you have available funds of $480k less loan of $350k means $130k is available to fund the construction.

In your case you want to borrow $250k to build. On top of the $350k existing debt that will bring your total debt to $600k, at 80% lend, the on completion value will need to be $750k for you to get the additional $250k at 80% LVR.

I trust this helps.

RightValue
 
You say the property is worth $530 now.

How much will the property be worth with the new house on it? i am assuming over $700K. The run down house went for $630K on our street not that long ago

Bank Just valued the property @ $530K. It's a run down house 50 odd yrs old so i am assuming house value is next to nothing.

What will be the cost of constructing the new place?
$250K + $10K ( Site Cost) + $10K ( Demolition) + $15K ( Driveway, Fencing etc) + 15K (contingency) = $300K

Basically the lender gets an "on completion" valuation done. .

say on completion the property will be worth $600k and you are borrowing 80%, then you have available funds of $480k less loan of $350k means $130k is available to fund the construction.


say on completion the property will be worth $750k and you are borrowing 80%, then you have available funds of $600k less loan of $350k means $250k is available to fund the construction.


In your case you want to borrow $250k to build. On top of the $350k existing debt that will bring your total debt to $600k, at 80% lend, the on completion value will need to be $750k for you to get the additional $250k at 80% LVR.

I trust this helps.

RightValue

My question is what if the value does not come out to be $750K+. What are my options.
 
My question is what if the value does not come out to be $750K+. What are my options.

1. Enjoy what you have.
2. Pay LMI with a a higher LVR.
3. Save more money.
4. Consider selling and buying an established house.. it could be cheaper even with stamp duty.



cheers
RightValue


PS: If you choose 1 or 2 .. get used to no sex from the wife due to her not being happy ... or just get divorced now..
 
1. Enjoy what you have.
2. Pay LMI with a a higher LVR.
3. Save more money.
4. Consider selling and buying an established house.. it could be cheaper even with stamp duty.



cheers
RightValue


PS: If you choose 1 or 2 .. get used to no sex from the wife due to her not being happy ... or just get divorced now..

might get more sex by taking option 2 and capitalizing the LMI rather than option 3 that might involve cutting the shoe budget!! :D
 
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