At Mortgage Street we are focused on finding you suitable finance, whether your next property development project is a multi-dwelling apartment complex or a skyscraper. Mortgage Street understands that your needs as a developer can be quite different, depending on your experience level and what kind of property you are looking to build. But whatever your needs, you will need finance to continue growing your business. Whether you’re considering a commercial or industrial development, a residential property development, or even subdividing land, Mortgage Street’s lending specialists can help you fund it.
Property development finance is a loan that can help you fund construction of more than one property on one title. Most banks and lenders split property development into two parts, and both can have very different approval processes, fees and charges, interest rates and risk assessments.
They are:
Mortgage Street prides itself on being different to banks and other lenders. We are focused on tailoring outcomes that are to the exact needs of every client, and we do it by actively listening to what they want, not what we think their needs may be. That’s because we want to help you find a suitable loan and mortgage finance product and help you by providing ongoing support over the life of the loan. When it comes to property development finance, our specialist technology can ensure a seamless process for our clients, as we provide them with all the tools, knowledge and experience we have. When it comes to property development, borrowing money can be a similar process to a regular residential mortgage, especially if your proposed development fits in with the residential definition above. However, banks and lenders will focus on the higher risks associated with lending money for this purpose, and as such there can be a range of extra things to consider. The first is LVR, or Loan-to-Value Ratio.
Loan-To-Value Ratio is the percentage amount you can borrow compared to the value of the property you are buying. If your property is worth $1million, and your LVR is 80%, then you will need to find a deposit of 20%. Having access to a larger deposit can give you a higher LVR, meaning you may be able to negotiate a better interest rate.
While some regular residential mortgages can allow a Loan-to-Value Ratio of up to 90%, banks and lenders tend to be more conservative when it comes to property development finance, either residential or commercial. That means the Loan-to-Value Ratio can be as low as 70% for larger developments, and maybe up to 80% for smaller, lower-risk opportunities. Speak to our lending specialists to find out what your Loan-to-Value Ratio might be for your planned project.
Mortgage Street may also take into account a range of other variables when finding out how much you may be able to borrow. These can include:
If you’re looking for residential property investment finance, rather than commercial, you may notice a few similarities with a regular residential Construction Loan. A Construction Loan can be suitable if you’re building a house, either to live in or as an investment opportunity. Building can be one of the most affordable ways to own a home in Australia, and a lot of that has to do with stamp duty. Stamp duty is a tax or a levee on a transaction, and is charged on a range of financial transactions, including when a property changes hand. When building, stamp duty is often only paid on the purchase of the block of land, not the home itself. As a result, people can save a lot of money buying a property off the plan.
Construction Mortgages also have a range of other benefits, ones that also apply for residential property investments, or developments under a certain amount of unit (eg four). The key one is that payments can be staggered, based on a range of agreed stages. What that means is a bank or lender will pay the builder only when those stages have been met, rather than all of it in one lump sum. That can save you money as the property developer, as you are only charged interest on the amount of money paid out at the time. Once construction has finished, the mortgage will revert to a typical standard loan. The construction stages usually include:
Most banks and lenders offer two different kinds of home loan options, whether you’re buying a home or developing property:
While Mortgage Street offers a range of loans, some may not be suitable for property development. It is unlikely property developers will be able to apply for a low doc mortgage, and other kinds of loans may attract higher fees.
The first step in applying for property development finance with Mortgage Street is to contact our lending specialists. You can call when it suits or use our special online calendar to book a time for us to call you at a time convenient to you. In the meantime, our Loan Application Documentation Checklist below can give you a quick idea of the kinds of information we may ask you for to start with.
However, a bank or lender is likely to want to know more information than what is in the above checklist, and a lot more than what is required for a regular home loan. They will need to understand the full picture of your assets and liabilities and develop a clear understanding of your credit report and credit rating. A bank or lender is also likely to want to know as much about your development plans as possible, to assess whether or not they believe it is viable and whether the risk is one worth taking. That can mean showing them your business plan, which will need to be as detailed as it can be. Our lending specialists can also help answer all your questions about whether or not you can buy one of the properties you are developing, and provide you with information around refinancing, if that is something you require.