Equity question

[BradW82]

Hi everyone ,

Can somebody please tell me , will a bank take the equity in a block of land into consideration when applying for a construction loan ?

We paid $152k about 7 months ago and is now valued at around $200k comparative to the blocks in the same street and next door in fact which are all identicall blocks.

We owe $126k on the block and need around $170k for construction .
Also can the FHOG be used as deposit also ?

Thank you ,

Brad

 

[Rolf Latham]

yes and yes

But the vals need to stack up

ta
rolf

 

[BradW82]

Will the bank do their own valuation or will they allow us to source our own ?
And one last one , will a bank usually allow you to access the whole amount of equity or allow for a buffer of some sort ?

Thank you,

Brad

 

[Peter_Tersteeg]

Lenders will almost always want to get their own valuation done.

Most people get an real estate agent's opinion as a valution. Keep in mind an agents opinion is often a prelude to a sale pitch. Banks will require a licenced valuer of their choice to do it.

 

[BradW82]

O.K this all makes sense . Thanks for the quick replys!!

 

[Mick C]

They wont allow you to use the full equity, there will be a certain buffer.
But yes it doesn't hurt to get a private valuation done.

Regards
Michael

 

[Rolf Latham]

depending on the loan type the range of buffer is 10 to 30 % of the total value that CAN NOT be used

ta
rolf

 

[tobe]

Unfortunately not always Im afraid.

In Melbourne we seem to have a scarcity of land, which means land developers negotaite to sell the land before they have cut the blocks, put in roads etc or gained plan of sub from council.
This means you may have left a deposit and signed contracts for a block of land, but are yet to settle?

In that case the bank will only use the purchase price for calculating equity, regardless of what the val says. Some lenders will use the increased val if contracts were signed more than 12 months ago.

Also, although comparitve blocks are advertised for a higher price now, as they are also yet to settle, the valuer will disregard them as 'comparables'.

 

[tobe]

Brad Im happy for you to PM me if you need any help with construction finance, I work as the finance manager for a major builder.