Hello all. I need some help in getting a better understanding of construction finance or selling off the plan. Say you take some vacant land and apply for basic construction finance with the view of keeping the house and renting it out. The bank would take into account the expected rental return when assessing the finance application.
Now, say you have the same vacant land but due to your other investment loans have already reached your borrowing capacity, and with your serviceability problem do not qualify for further (construction) finance. So you decide to sell the vacant lot of land instead and take your profits now.
I have explained this scenario to a real estate agent in that should I not qualify for finance allowing me to build and hold I would sell the land before construction. The agent suggested I WOULD still qualify for finance as long as we get a pre-sale, and sell the house and land off the plan (rather than selling only the land).
I’m mixed up because sure I would then have a guaranteed sale but why would this change the bankers mind about lending me the money? Don’t I still need to show that I can service the loan during the construction period? If I could do that then I wouldn’t worry about the pre-sale – I could qualify for the finance AND keep the property!
Now, say you have the same vacant land but due to your other investment loans have already reached your borrowing capacity, and with your serviceability problem do not qualify for further (construction) finance. So you decide to sell the vacant lot of land instead and take your profits now.
I have explained this scenario to a real estate agent in that should I not qualify for finance allowing me to build and hold I would sell the land before construction. The agent suggested I WOULD still qualify for finance as long as we get a pre-sale, and sell the house and land off the plan (rather than selling only the land).
I’m mixed up because sure I would then have a guaranteed sale but why would this change the bankers mind about lending me the money? Don’t I still need to show that I can service the loan during the construction period? If I could do that then I wouldn’t worry about the pre-sale – I could qualify for the finance AND keep the property!