Buying land/property

[Kryton]

Quick rough question for anyone in the know.

Basically, can i borrow money to buy a property/land (acreage) even if i dont want to live in/on it and it is in a completely different area?

The property may or may not have a house on it and may or may not have planning/building options.

I dont own a home, i have no mortgage and i couldnt say for certain that the property would provide income (depends on property and location).

probably be looking at the 150k or less mark with a 10-20% deposit.

Is this the sort of thing banks will lend money for or do i have to go and live in the first house/land i buy?

[OLDFORDNUT]

you dont have to live in them,
you wont get the first home bonus on a vacant block
bank will still look at your finances and deposit same way criterior as any other loan
i.e. ability to service loan and job security

[Mark s]

I borrowed money for a block of land with no house on it. It took me around 5 years to start building on it.

So yes you can.

[winkle]

Generally speaking, as long as your income can service the loan, you shouldn't have any problems. Specifically speaking, if the property is over 25 acres, you may struggle to get mortgage insurance, meaning you have to keep the Loan to Value Ratio (LVR) to less than 80%. So you would need to put up a 20% deposit, plus roughly another 5% in costs. The Commonwealth Bank at this moment are pretty much lending on any property, whereas other banks are being a bit more picky. If you can service the loan on your income alone without relying on any income from the property, you will have a better chance of gaining approval.

If the property has no residence, you won't get the First Home Owners Grant, as OldFordNut mentioned.

[T3ts50]

Check if the property is classed as rural land, as some banks will only allow you to borrow upto 70% of the value if it is classed as rural.

[silver_xe]

We got a loan for a block of land through commonwealth and part of the conditions was we had to start building on the land within 4 years, so thats something else to consider.

[dave351cid]

i borrowed money to buy my 4.3 acre block of dirt. i had no other property for security.
i bought it as a vacant lot with no set time to build.

i went through a mate who is a loan broker to find the money and got it from a building society. that was 2 years ago and he said that most of the banks were a bit hessitant about lending for vacant land and the ones that would lend charged extra interest.

[GasoLane]

I know sombody who, a few years ago, applied for a personal loan at a bank. When asked what it was for they replied 'it's personal you just have to lend me the money, not know what it's for'.

They got the loan.

[Brent]

If classed as rural, usually up to 70% LVR. But larger properties (broadacres) often attract lower lending levels (50-60% LVR) due to marketability issues etc. If residential, 80%. Check with your bank of choice.

The leverage is only one half of the equation though. You'll need to be able to demonstrate that you can service the debt off the income that you currently earn, as I assume that the land won't be generating any income for you (for the time being at least?).

And a small tip........work out what loan you can afford based on an interest rate of at least 3% higher than where rates currently are set. If you can only just afford the loan now, then what will happen when rates inevitably go up in 1, 2 or 5 years time? Build a buffer in mate. There's still a heap of people out there who are geared to the eyeballs with nowhere to go when rates go back up.

[Munch]

^^^perfect answer!!!!! and interest rates WILL go up, it just depends when and how much!

Also remember that, the more money you can put into the property purchase will lower (or indeed abolish) the mortgage insurance for the loan. So show that bank you have cash, it'll help lower a lot of the charges and fee structures

As previously advised by the boys above, banks are more and more hesitant to loan cash on vacant land with no thought of building, or long terms prospects of building. MOST banks at the moment will not lend you more than 70% (CBA will lend you up to 85% if you have previous dealings with them) becuase they have overcommitted in the past and been caught out.

I know NAB is one of the few that will use guarantor loans (i.e. use other people to secure the loan if your assets or earnings are low).

Also remember that all banks are extremely slow at the moment for UNCONDITIONALLY approving loans (sure you'll get pre-approval; so will Clyde the Monkey) so if you do make a purchase and its subject to finance, keep an eye on the approval date, and make sure you get extensions if required.... otherwise you'll become unconditional, and you'll be in the poo financially.

[Rob's 76 Effy]

Bank West will lend up to 95% of the loan, i have a preapproval through them now, just waiting on the right house to come along, BTW i have never banked with them before applying for a housing loan

[JAYMZ]

Dont be afraid of credit unions too. They usually dont have as much restrictions. But that could just be my one.

[Munch]

Originally Posted by Explorer_Me

Bank West will lend up to 95% of the loan, i have a preapproval through them now, just waiting on the right house to come along, BTW i have never banked with them before applying for a housing loan

That's interesting news and something for me to keep in mind... I've had problems with them in the past with off the plan purchases, and was unsure of their policy...

head towards bank west if you're getting donuts!

[devilcv8]

Originally Posted by Munch

I know NAB is one of the few that will use guarantor loans (i.e. use other people to secure the loan if your assets or earnings are low).

so do Commonwealth. my son and daughter have just purchased a property in western sydney with no deposit apart from the first home buyers grant. Only guarantee was my wife and I guaranteeing the deposit amount of upto 20% of the loan.
settles at the end of July