Lending on End Value

Hi Guys,

I've got a house worth about $560K owing about $440K.

I have a Planning Permit to put a unit in the back yard, and subdivide into 2 blocks once building is completed - I estimate it is going to cost approx $300K to build the unit in the back yard.

I'm looking to borrow approx $260K for the construction (as i will put in $40K), plus I already owe $440K on existing - so all up debt will be around $700K.

Once finished and subdivided, the front will be worth say $480K and the back worth say $520K so total end valuation will be around the $1M.

I've been told that because the subdivision doesn't happen until after the build is finished that the valuation will be valued as 2 on one block and that the valuation will be discounted by about 20% - this would put the valuation back to around $800K and mean I need to pay LMI (as loan would be approx $700K).

Is there a way around paying LMI or using end valuation? (other than subdividing before the build, or borrowing 80% of discounted valuation)

Many thanks
 
generally, with a resi loan ..........no

GRV lending ( gross realisation) based on end value isnt really available for smaller resi developments that I am aware of

ta

rolf
 
Just curious as to why you could not get the subdivision done now. In theory it does make sense to do this during the build or after completion but is there any hard in doing it beforehand?
 
Just been through a similar process with a 2 villa development. The bank would only lend upto 560k and we thought the end value would be 640k. We had it valued at completion on one title at 570k (exact cost to build). The valuer put in his notes that upon splitting the titles each villa would be valued at 330-340k. It was frustrating as we had to xcoll another IP and it has taken us the best part of 9 months to get it all sorted but our surveyor has lodged the titles this week, so hopefully we can revalue, uncross the IPs and access some equity in the new year.

In my experience there was no way around it, it was frustrating and it took longer than we expected to get it done.

Good luck
 
Thanks for replies so far guys.

Further to that - would any lenders waive LMI to 90% with this sort of lending for certain professions, ie if I was an Accountant?
 
Thanks for replies so far guys.

Further to that - would any lenders waive LMI to 90% with this sort of lending for certain professions, ie if I was an Accountant?

Yep Westpac and St George do.

Do you work for an accounting firm? Do you have annual income (including rental) of $150,000 per annum? Do you have CPA, CA or relevant certification?
 
Just curious as to why you could not get the subdivision done now. In theory it does make sense to do this during the build or after completion but is there any hard in doing it beforehand?

Because most councils will only allow for a staged development which consists of construction first and strata or torrens title subdivision later.
 
Yep Westpac and St George do.

Do you work for an accounting firm? Do you have annual income (including rental) of $150,000 per annum? Do you have CPA, CA or relevant certification?

Thanks Shahin,

If I don't meet that criteria - does that disqualify me from the LMI waiver?

ie I earn less than $150K (even with rental income) I am still studying my CPA - have 1 module to go which I expect to finish mid next year. I have a Uni degree and am working as an Accountant for a manufacturing company.

Many thanks.
 
Thanks Shahin,

If I don't meet that criteria - does that disqualify me from the LMI waiver?

ie I earn less than $150K (even with rental income) I am still studying my CPA - have 1 module to go which I expect to finish mid next year. I have a Uni degree and am working as an Accountant for a manufacturing company.

Many thanks.

Unfortunately it does mean your not eligible for the LMI waiver.
 
Thanks Shahin,

If I don't meet that criteria - does that disqualify me from the LMI waiver?

ie I earn less than $150K (even with rental income) I am still studying my CPA - have 1 module to go which I expect to finish mid next year. I have a Uni degree and am working as an Accountant for a manufacturing company.

Many thanks.

from my experience you will not qualify without the CA or CPA but income level is more flexible.

I have some clients who are lawyers but who do not practice. I am helping them get their practiciing certificates just so they can qualify for the LMI waiver. Did you study law?
 
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