Finance on New Construction

[Rick]

Hi everyone,

We have some land on 12 months builders terms for the construction of house and land packages and am having trouble finding finance.

We also have some without the terms and have had no problem financing them at 100%. The problem is with the builders terms, they have issues with security as we don't own the land, technically.

I know there is a way, there always is. I just have to find it.

Any help would be greatly appreciated.

Rick

 

[Michael Yardney]

Originally posted by Rick
Hi everyone,

We have some land on 12 months builders terms for the construction of house and land packages and am having trouble finding finance.

We also have some without the terms and have had no problem financing them at 100%. The problem is with the builders terms, they have issues with security as we don't own the land, technically.

I know there is a way, there always is. I just have to find it.

Any help would be greatly appreciated.

Rick

Rick
The problem is the land is not yours, so you cannot offer it as security. No lender will lend you money for the construction as they will not have the security of the land underneath it.

The only way forward as I see it is to offer other security (another property) to the lender.

 

[RightValue]

Rick,

Michael is I believe spot on as to why you can't get the finance, you can't mortgage the property and the title holder (the developer in this case) owns the title and as a result owns everything affixed to the land.

I was going to do this myself this past year but was too busy. I intended to finance 100% of the construction price myself.

Have you tried private equity finance, offering an attractive rate of interest, after all it will only be for a short period? Someone like myself may be prepared to do it depending on valuation and cost of construction and amount of equity you have and construction time.

just a thought.

cheers,
RightValue

 

[juzz]

You must always think with construction or private finance,
what security you have??
Lenders will think. If we need to sell them out? What do I
have as security at all stages. ie what is my safety margin
if they dont pay? They must have some sort of mortgage security, or way to get their money back easily & safely.

There are always ways, maybe your not speaking to
people who do construction finance?
This is a specialist field. - Not all brokers can do it and
will probably refer it through their network.

Builders terms means you've got a little time to do all the work before settlement. You can pre arrange finance or the money for settlement thats the Idea. You must get everything ready to start construction.
If you don't you wont get the money/drawdown, and it must be able to be morgaged before any drawdown ie In the borrowers name or the equity(Land) provider must allow it to be mortgaged.

As always this is not any form of advice.

Justin