I currently have a mortgage on my house, but intend to purchase a block and build in the near future. What would be the best course of action here?
Ideally I would like to purchase the block first then commence building whilst still living in the current house, but dont think i can afford to service two loans concurrently.
So is it best to sell and payout the current mortgage first, then re-apply for another loan to build? (downside is that I'll then have to rent during the construction period)
If so, can I get more reassurance from the lender than just a pre-approval for the new loan BEFORE i sell the current house?
Bridging loan?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Bridging loan?
Most people would do this in the following order:
1. Buy land.
2. Get pre-approval for construction & commence council approval process.
3. While waiting for council approval begin selling your house.
4. Ideally sell your house with a long settlement, allowing you to build prior to completing the sale OR negotiate a lease back from the vendor until your house is complete.
Ultimately if you can't afford both loans at the same time then you'll have to sell your home. With a leaseback or a long settlement then you can avoid moving house twice but still have the security of knowing your house has sold.
1. Buy land.
2. Get pre-approval for construction & commence council approval process.
3. While waiting for council approval begin selling your house.
4. Ideally sell your house with a long settlement, allowing you to build prior to completing the sale OR negotiate a lease back from the vendor until your house is complete.
Ultimately if you can't afford both loans at the same time then you'll have to sell your home. With a leaseback or a long settlement then you can avoid moving house twice but still have the security of knowing your house has sold.
Re: Bridging loan?
Thanks for the quick reply. Does this mean that I apply for loan twice? Once for the land, then later for the construction?
- Otto Dargan
- Mortgage Specialist
- Posts: 7730
- Joined: Sat Sep 06, 2008 5:55 pm
- Location: Sydney, Australia
- Contact:
Re: Bridging loan?
Yes that is correct. If you are building right away then we would just do one loan, if the land will be purchased long before construction then we'd do a land loan and a preapproval for construction.