Land and Construction Loans

Hi All,

For a new home build (NSW), do you recommend getting the land & construction loan (90% lend, $800k purchase price) together? Or separately?

From some calculations, it looks cheaper in terms of LMI to separate these loans (i.e. two lots of $360k loans, instead of a big $720k loan).

Please enlighten me.
 
LMI will be the same unfortunately. It would only be diferent if it were two diferent securities/houses.

I suggest doing them together for other reasons, mainly risk mitigation if there are any surprises from the builder, or if you have a short val, or your circumstances or the banks policies change between getting the loan for the land and starting the build.
 
I had a lender tell me (with a refinance) to do the land then the build as a separate loan once it comes across... I said no way - we'll do the whole deal upfront and incorporate the build costs - what happens if you dont approve the build once the land comes across then we have to go somewhere else.

But I'd be getting the undertaking if you dont have the build side sorted out yet
 
as per Spectre

get a preapprovl for the build if you are looking to do the build separately

want to make sure you arent burning your lmi if the build cant proceed

ta
rolf
 
The LMI is the same since the land and build loan are linked to the same security.

The process is easier if its two separate applications but then there is a risk that the land loan is approved but the construction loan isn't. Wasted LMI and potentially a land loan accruing interest and no construction loan forthcoming is a small problem.

So I generally would advise one application but will do 2 if its an easy deal and you have multiple lending options (and no LMI).
 
Do most lenders lend up to 90% LVR for land & construction loans? I read some internet articles saying most lenders lend up to 65%-70% of the land value.
 
Do most lenders lend up to 90% LVR for land & construction loans? I read some internet articles saying most lenders lend up to 65%-70% of the land value.

It's the same as a normal house loan....up to 95% etc
 
Last edited by a moderator:
LMI will be the same regardless as already mentioned.

In WA you will pay circa 15% less in stamp duty if land and FPBC (fixed price building contract) are lodged for finance together.

If no FPBC available then land is purchased separately and a rebate applied for the stamp duty once FPBC is available.
 
Actually the LMI might be cheaper if you pay some on the land and then some on the construction with certain lenders.

NAB have a funny little quick in regards to land and construction loans where the premium is less by paying on the initial land.

They don't shout about if from the roof tops and in fact most Bankers would be aware of it but certainly worth considering.
 
Back
Top