Hi All,
I have a small three townhouse development in Melbourne I am seeking some advice on how best to finance the construction component of the project.
Some rough figures:
1/Purchase price on Land (without planning approval) $580K
2/Existing Loan on Land $465K (80% LVR)
3/Fixed Building Contract for construction of $630K inc GST
4/Development Costs (planning, subdivision, utilities, contributions, drawings, engineering, consultants, interest on loans, holding costs on land, conveyancing, demolition etc) = 170K approx.
Note:
a/ intention is to build, refinance, keep & hold long term.
b/ $170K development costs will be paid in cash, of which about half has already been paid, the other half will be paid throughout the build time (not seeking finance for these costs).
c/not registered for GST as the intention is not to sell/claim back credits.
d/there are four parties (all related) on the title & the finance will be in all four names.
Main queries are:
-Max project debt will be $1.1m inc $58K of GST on the build. Can this be funded as a residential construction loan, separate to the existing loan on the land? Understand some lenders will not fund GST on building contracts.
-If it needs to be set-up as a commercial loan, will the bank have to payout the existing mortgage & refinance under commercial terms incurring higher rates/line fees etc on the full $1.1m or can it be setup to just cover the construction costs?
Any advice would be much appreciated. I have had some advice from a broker but it seems he doesn't really specialize in small developments..
Thanks.
I have a small three townhouse development in Melbourne I am seeking some advice on how best to finance the construction component of the project.
Some rough figures:
1/Purchase price on Land (without planning approval) $580K
2/Existing Loan on Land $465K (80% LVR)
3/Fixed Building Contract for construction of $630K inc GST
4/Development Costs (planning, subdivision, utilities, contributions, drawings, engineering, consultants, interest on loans, holding costs on land, conveyancing, demolition etc) = 170K approx.
Note:
a/ intention is to build, refinance, keep & hold long term.
b/ $170K development costs will be paid in cash, of which about half has already been paid, the other half will be paid throughout the build time (not seeking finance for these costs).
c/not registered for GST as the intention is not to sell/claim back credits.
d/there are four parties (all related) on the title & the finance will be in all four names.
Main queries are:
-Max project debt will be $1.1m inc $58K of GST on the build. Can this be funded as a residential construction loan, separate to the existing loan on the land? Understand some lenders will not fund GST on building contracts.
-If it needs to be set-up as a commercial loan, will the bank have to payout the existing mortgage & refinance under commercial terms incurring higher rates/line fees etc on the full $1.1m or can it be setup to just cover the construction costs?
Any advice would be much appreciated. I have had some advice from a broker but it seems he doesn't really specialize in small developments..
Thanks.