House and land package - construction loan or standard loan?

[beachgurl]

DH and I have been looking at buying land and constructing but have come across a house under construction in the same part of town. We've been told if we want it we have a few weeks to sign the contract and want to get finance in the meantime. it's not completed til Aug/sep and the frame has just gone up.

Is a house and land package (one that settles on completion, not progress payments) classed as a construction loan or a standard loan? Do the banks value it partially complete or is it difficult to get finance for these? We like the idea of not having the responsibility of chasing up the builders or making decisions but wonder how hard it is to finance. BTW we are in LMI territory.

thanks in advance.

 

[RightValue]

In this case the property is valued subject to completion (a To Be Erected valuation).

You do not have progress payments so it is not a construction loan. Upon completion the bank lends you the full amount and settles with the vendor.

Think of it as buying an existing house with a long term settlement.

This can be a great wat to buy a new house.

You are not paying interest on the land, nor on the progress payments (these can be substantial, especially as construction time drags out) and you get the stamp duty reduction benefits.

cheers

RightValue

 

[rugrat]

Just as Right Value said.

This is how we bought our PPOR and are now purchasing our IP.

 

[beachgurl]

Thanks for your responses.

So did you only get conditional approval until the property was complete or could it get to unconditional? We've just been told we can only get conditional at this stage and feel it's risky to sign the contract without having full approval. Or is this just how it's done?

 

[Rolf Latham]

Normal loan

Some lenders will issue an uncon, with only one cond, that they can do a final inspection. The valaution would be done as RV indicated on an as complete basis

If you are concerned about the conditional only, check the what the conditions actually are, many lenders are good for 6 to 12 mths on these and willhonour them unless ur circumstances have changed.

ta
rolf