We have put together a list of frequently asked finance questions.
Bridging finance is a short to medium term loans typically 3months to 12 months. Examples include refinancing an expiring loan, pulling out equity whilst selling down, urgent settlement when a lender such as a bank is unable to guarantee settlement by the required date.
If all documentation is received and current, a bridging loan usually takes 2-5 business days to settle. It is possible to settle within 2 business days if the “LVR” is low and valuation assessments are simple and reliable (such as Government Rates notices). The valuation assessment is the slowest portion of this process.
When applying for an urgent short term loan it is beneficial to have all your documentation ready to settle the loan as quickly as possible. This can include current or older property valuations as well as your proposed repayment method (such as a sale, capital coming from development sales etc).
Typically bridging finance is for 3-12months.
The term LVR stands for Loan to Value Ratio. It is the value of your property as a percentage of the property loan. It is calculated by taking the amount you plan to borrow divided by the price of your property.
The term ‘GRV’ stands for Gross Realisation Value, which is the value of retail asking prices. The ‘GRV’ is not to be confused with ‘GRV’ net of gst of the project upon completion upon which loans are based on.
NRV stands for Net Realisable Value. This is the value after deducting GST and all selling costs such as sales commissions, advertising and marketing costs. This figure is then used to assess the profitability of the project by deducting all project costs such as construction, land, finance and permit related costs.
Construction finance is a loan that is provided to build or redevelop a property. The lender will pay your loan in smaller amounts based on the QS (Quantity Surveyor) report. Construction loans are interest only for the duration of the build and there are no payments made until completion of the project.
Construction finance is usually for a period of 12 – 30 months.
Site acquisition funding is a type of loan that is used to finance the purchase of land for which you intend to build a property on. The block of land is used as security for the loan.
Land Funding is usually 12 – 18 months due to the fact that majority of land finance is to seek a ‘DA’ or Development Approval to develop the property.
A second mortgage is a loan that is secured by a property in addition to the first mortgage. In the event of a default, the primary mortgage is paid off before the second. As this has a higher element of risk, the interest rate charged for the second mortgage tends to be higher.
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