pumpkin blossom

Hi all,

can you get a mortgage to buy land and then add to it to build a house? How would that work? Do they give you the money all at once or as it is needed?

Thanks very much

chrisandvee

Im very interested in this question myself. Does anyone know what %deposit you would need for the land or do they add the land price and build together?
sorry to jump in your thread

walaj

Yep - you will get amounts at various stages of the build to pay the builders, depending on yor mortgage supplier they may do an inspection at each point before releasing funds (& charge you for it).

If you are having an architect design (one off, rather than a project home) they can be more wary (more scope for cost to escalate). If your loan is less than the land that works in your favour, as they see it if you make a pigs ear of the house & then default then the land value is a good bet to cover the loan.

We are looking at an offset mortgage getting approval for an amount slightly higher than we want (but still affordable) should we go over budget on the build of the house. This saves cost hassle at later date or extending mortgage, but be aware it is also a temption to include the 'extra' in the budget.

peast01

we are currently building at the moment, we took out a mortgage for the land first which we put 20% deposit on, and now we are starting to build the first loan is extended. we are only payinf 15% deposit on this. The house payments are made in stages the first couple you use your own deposit money and when this runs out you start getting money from the bank. we also added things like the pool, landscaping and fencing to the home loan.

DunRoaminTheUK

Hi.

This is exactly how it works.

We bought land in December and initially paid a small deposit on the land and then the remainder upon settlement. Fortunately, we put down the lions share on the land purchase so not too bad. We started paying the mortgage repayments the month after settlement.

We are now moving into the second phase which is the first of a succession of draw-downs on the mortgage amount for the actual house. The first payment is 5% on 1st day of build followed by 15% on the day they pour the slab (today) followed by successive amounts along the way (about 4) until the house is complete. As each part is "drawn-down" (AKA "borrowed") then we start paying the mortgage repayments on this amount also (proportional to the amount draw-down at that point). The hard-part is managing a large rental cost with 90% (of) mortgage payments towards the end of the build. We are managing this by way of our first-time buyers grant.

The total amount (total for land and house) is indicated at the very beginning of the borrowing process but you don't have to "take it" all at once (as you would in the UK). Just make sure that you have a good idea of how you are going to manage progressively increasing mortgage repayments, as the build progresses (especially if you are renting somewhere relatively expensive).

chrisandvee

so say for example we have $70000 in cash and we are looking at a total value of $400000 for house and land package doyou think our $70000 would cover the deposits for various stage payments and deposits?

DunRoaminTheUK

You'd certainly be OK for paying deposits with $70,000 as you are really not talking more than a few thousand for house and land.

The remainder on mortgage would still be slightly less, in terms of mortgage repayments, than the average monthly mortgage repayment (it's said to be at the $2,500 level now).

If you borrowed $330,00 I think that you are looking at a monthly repayment (depending on lender etc) of somewhere in the region of $2,400 (approx).

pumpkin blossom

Thanks very much everyone. Sounds great.
One last question, how long does it normally take to build the house, ie, how long would you be paying both rent and mortgage?
Thanks again.

Gremlin

Hi all.

Sorry to go off track slightly but can anyone tell me if there is a time limit on how long you can own a plot of land before you have to build on it, or is it unlimited if you actually own it outright? We want to rent for a year or so (Gold Coast) and then build once we know we are settled in a particular area. We thought it would be a good investment to buy a plot in the area we wanted to settle fairly soon after we arrived (judging by the way land prices seem to be flying upwards!) and then build when we're ready.
Anyone done a similar thing?

Thanks

sassie

Hi. I think it very much depends on where you want to build and what covenants are in place. The estate we built in say that you have to build within 9 months of land settlement. Having said that, the block next to us is still vacant, and we know it was sold at least 12 months ago!

TheSubMainMan

I have to ask,

Is it really worth all the hassle of building your own home. I mean the stress of it all, builders not turning up, going over budget etc'

Is there a profit in there some where? If so how much?

I guess I'm asking is it worth it, profit wise?

sassie

For us, it was definitely 100% worth it. But then again, we didn't have any hassle, no stress, everything went according to plan, and was finished almost on time, and at the end of the day, we got exactly what we wanted, which was why we built in the first place. We went slightly over budget, but we knew about these extra costs well in advance, so there were no nasty surprises. I know that some people have had more than their share of problems, so I guess everyones exerpience will be different.

chugo101

Does this mean you can get your first time buyers grant before the completion of build?

walaj

This varies from state to state - where we are you go not get this until the council release the certificate that says house is complete & you can move in. The house needs to be completed within 12mths of an 'event' & from memory not sure if this 'event' is the purchase of the land or contract with builder.
The enquiry I made was that I have seen a recent approval by my local council that has taken nearly 11mths, which I was reassured that kind of situation would make allowances for delays by council. (Should be about 3mths here, but we never know with this council)

On to how long - bit like piece of string - depends on your council. Ours is very fussy, so for instance we could not put changes in suggested by builder (as they cost us $ks), but they could refuse it on those points delaying application. Having a builder familiar with the council for us is an important aspect - also gives us chance to view examples of their properties & ask the owners Qs. Project houses are likely to be approved quicker. They (council) have been criticised for length of time they take, but claim they are reducing this!!

If you are buying a piece of land you have nowhere to stay during council approval, if you are knocking down then you have to factor in cost of the demolishion.

When looking for land, other considerations include seeing if it is on high or low side of road (high makes drainage easier), likelyhood of rock, amount of slope. If the land has these downsides, then what you save on land cost will probably be spent on extra costs to build.

DunRoaminTheUK

Yep. It's provided to you on completion of laying down the slab (here in QLD).