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Today I’m going to show you how to avoid the BIG mistakes made with construction home loans. In fact, these are the same tips I’ve used to help my customers go from being declined to approved.
00:00 Construction Loans Explained [4 Massive Mistakes]
00:56 1. Do it all at once
02:48 2. Recent Sales
04:28 3. The Numbers
05:07 4. Variations
I’m Josh Vecchio, mortgage broker with Hunter Galloway. And in this video I’m going to walk you through my 4 ways to avoid BIG construction loan mistakes, step by step, so keep watching!!
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Mortgage Broker Brisbane Hunter Galloway
Head Office: 3 Latrobe Tce Paddington QLD 4064
PO Box 841, Paddington QLD 4064
CBD Office: Level 20, 300 Queen Street Brisbane, QLD 4000
If you want to get started, please get in touch and we can book a time that suits you – either a phone call information session or a face to face meeting (which doesn’t cost anything for you).
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Last year we saw a troubling trend, construction loan after construction loan, declined. It had nothing to do with our customers financial positions and everything to do with the banks valuers.
1 Do it all at once
Having made the decision to build a new home the first thing you’ll want to avoid doing is rushing. This is a big mistake. Remember fast is slow and as counter intuitive this is, slow down, take your time and don’t be pressured.
When buying land, there’s always demand to settle as quickly as you can. In Queensland generally sellers want this done in either 30 days from the contract date or 14 days from registration.
So the first thing you're going to do is change this! Have both finance and settlement terms in line up with construction. This means rather than owning your land first and months later getting applying for construction loan approval. You’ll have the ability to get approval for both land and construction loan.
This is hard as will need time to allow your builder to prepare the fixed price building contract, plans and specifications.
2 Recent sales
If you’re in a new estate the bank’s valuers will have trouble valuing your property. The valuation report is known as an as if complete valuation. That is to say, when the property is completed, in that market, what will it be worth. Now you see if its a new development, there may not be any properties in the area that can be completed, as they’ll look at the past 6 months history.
How to avoid this is to offer the valuer sales history from the suburb over, thus giving the valuer context and for something to work with. It’s best to do this upfront as once the report is produced the horse has bolted.
3 Beds, bath, car
The bank's valuers when valuing the property will look at data to complete their valuation. The primary data they use to confirm the value of your property is the number of bedrooms, bathrooms, car spaces, floor area and size of your block. So an easy tip to help increase the value of your yet to be built home is to increase these numbers. So for example, if you’re looking to have a study in your home, rather than build a study, invest a little more and build a bedroom (with the main difference in it either having a wardrobe or not). Not only will this help come valuation but also when you sell.
4 Variations
A common problem is that people rush to get their plans into the bank. Only to change the plans of the house again take it slow and look to get every detail sorted before getting the approval. As in most cases once the banks approved your loan any changes to the contract will result in you footing the bill rather than bank.
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