Deal

[pi2012]

Is this Deal possible?
Current Property Value - $670,000 (DA for 3 Units)
Mortgage - $565000
Draw Equity based on current market value (LVR 95%) = 670,000 *.95 - 565,000 = $71500 (Less LMI) = approx $70,000

Later borrow 80% of $600,000 from Bank for construction of 2 Units without paying LMI
Calculations - 600,000 * .80 = $480,000
Construction Gap will be funded using equity calculated above plus savings in the bank or equity in different property.

Is this Deal is exceptable by Banks and Mortgage Insurance Company?

 

[craigb]

It looks ok to me a bit messy and alot of prayer but its the valuers that have let me down in the past, ie get the current land val, get plan drawn ,apply them to council wait for E-V-E-R for the approvals, whilst paying mortgage one, then apply to finance for a true const, value, get maybe 75 lvr, and sighn contracts with builder. who would start with a 20k deposit, most drawdowns will be 5k short on the vals, the builder may not like this, if you do not have the $$$ .
a wing and a prayer , but yes it seems ok , others will tell me if i missed a/thing,

 

[Rolf Latham]

Big push

the biggest hurdle is the 95 % cash out

Depending on the overall strength of the deal blah blah, it may be possible, but its not one id relish

ta
rolf

 

[pi2012]

Big push

the biggest hurdle is the 95 % cash out

Depending on the overall strength of the deal blah blah, it may be possible, but its not one id relish

ta
rolf

Thanks Rolf.
Could you please elaborate on 95% cash out as being hurdle.
Mortgage Insurance company will lend upto $750,00 per security and shouldn't have any issues as the value of the property was done by one the registered Valuers on Bank's Panel List.
Does Bank see this deal as a risk or is this an issue with Mortgage Insurance?

 

[Rolf Latham]

Hiya PI

Most lenders ( read lmi providers as well) wont do "refinance" above 90 %, and many now have loan limits of around 500 k on metro areas.

The other thing that wont help is if the value contains any DA component.

ta
rolf

 

[pi2012]

Hiya PI

Most lenders ( read lmi providers as well) wont do "refinance" above 90 %, and many now have loan limits of around 500 k on metro areas.

The other thing that wont help is if the value contains any DA component.

ta
rolf

So its like pretty much impossible to obtain a construction loan for development if you don't have 20% deposit??

 

[Rolf Latham]

Hiya

With the parameters you have there it would be tough with anything above an 80 % lend in the current climate

ta
rolf

 

[craigb]

but if you were able to do every bit of build your self and work like a convict you should get the drawdowns as required through the project, keep in mind you mortgage payments will have to come out of this also. because a full time job is now building and you will be producing no job income.

 

[StuartW]

Maybe one construction loan for $600k might work (plus refiance of $565k). That would get around the cash out issue.

LVR would be ($565k + $600k) / ($670k + $600k) = 92% + LMI.

It would be tight... depending upon other details you might consider NAB or Westpac.

 

[pi2012]

Maybe one construction loan for $600k might work (plus refiance of $565k). That would get around the cash out issue.

LVR would be ($565k + $600k) / ($670k + $600k) = 92% + LMI.

It would be tight... depending upon other details you might consider NAB or Westpac.

I have been told that Mortgage Insurer will only consider $750,000 max. per security...how would this deal work if the security is still on one title..its just getting all messy and seems impossible....

 

[StuartW]

I think NAB still has open policy above $750k which means it doesn't necessarily need to be approved by LMI. Not 100% about 3 dwellings on one title... reducing the LVR to 90% would make the deal stronger.

Hard to comment without reference to overall strength of the deal.