Switching banks for Construction Loan

[mitchitygrub]

My wife and I are currently in the process of obtaining construction finance for a PPOR house in Brisbane.

We purchased the land in early 2012 for $300k. Comparable land in the same area is currently selling/has sold for between $350k~$400k. Comparable homes in the area are now selling for $750k+.

The as if complete bank valuation through our current bank came back at $655k (land @ $300k & build @ $355k). The 355k is the build contract price.

I thought the total value would come back higher, given the recent sales of land well above $300k.

My questions

1. Would it be worth switching over to a different bank if a higher as if complete valuation can be achieved?
2. If a higher value is achieved through a different bank, how would this affect LMI. Through our current bank, at $655k our LVR is 87.5%.

 

[tobe]

Were the recent sales at 350 and 400k developer sales? If so the valuer will have ignored them. That said, theres no harm getting some second opinions. Most broker can order upfront valuations so you can see if valuers opinions difer in that particular area.

 

[mitchitygrub]

Were the recent sales at 350 and 400k developer sales? If so the valuer will have ignored them. That said, theres no harm getting some second opinions. Most broker can order upfront valuations so you can see if valuers opinions difer in that particular area.

No - recent sales are all infill sites. The land is in the inner east of Brisbane.

 

[HLE]

The as if complete value does not really matter unless it comes in lower than expected. The reason is all banks will take a conservative approach and use the lower of land + fixed price contract value or as if complete valuation.

Given you do not have a low valuation issue then this should make no difference to change banks unless you get a significantly higher land value only.

 

[Rolf Latham]

Moving would incurr new lmi..............so the advance in val would want to be worthwhile

ta
rolf

 

[Marty McDonald]

[*]Would it be worth switching over to a different bank if a higher as if complete valuation can be achieved?
[*]If a higher value is achieved through a different bank, how would this affect LMI. Through our current bank, at $655k our LVR is 87.5%.
[/LIST]

So you want to borrow $573,000 by the sound of it (87.5% LVR on $655K).

Therefore to avoid LMI altogether you would need the land to be valued at $361,250 or more . That doesn't sound unreasonable. I would definitely being trying other options.

$573K / 80% x 100% = $716,250 (TBE value to be 80% LVR)
$716,250 - $355,000 tender cost = $361,250 = minimum land value