Property developers have had a rough time over the past 6 months.
In fact, this is an understatement.
They’ve been battling increased construction costs, rapidly rising interest rates and timeline blowouts. And we're only skimming the surface here.
This year, property developers across Australia were forced to delay or mothball many of their projects. This resulted in additional holding costs, including interests and the need to restructure and refinance their debts.
However, crumbling under the pressure wasn't an option for many. Developers needed to find ways to stay afloat and profitable. People turned to a land bank refinance loan for support.
The Opportunity: Land Bank Refinance Loans
The refinance of a land bank facility allows clients to release some of the equity in the land into working capital in the form of cash out.
The Benefits
This type of loan benefits property developers who have maturing loans which need to be refinanced to a new lender.
They give the property developer the gift of time, allowing them to either wait for marketing conditions to improve, or try to achieve one or more of the following:
- Remove the risk of defaulting with a lender unwilling to extend
- Fund interest costs during the renewed term of the loan
- Improve cash flow
- Secure a development approval
- Procure and construction contract
- Secure pre-sales, if required
- Obtain operation works and building approvals
- Procure construction finance approvals
- Achieve construction finance approvals
What to expect?
The process of refinancing a land bank loan can take as little as 1 - 6 weeks from start to finish. The time frame depends on the size and complexity of the project and borrower. Typically, the DFP team can secure an indicative finance approval in a few days.
The process of obtaining a valuation report takes anywhere from a few days to 3 weeks. This also depends on the size, complexity of the security, and location of the site. Valuers in regional locations are currently struggling for capacity, so additional time is required for them to complete a valuation report.
The creation of mortgage documents and satisfying all loan approval conditions typically takes 1-2 weeks.
Our Top Tip
Knowing who offers the best combination of high LVR’s and lowest interest rates is valuable but not easy. There are several variables such as:
- Loan size
- LVR
- Location
- Vacant vs improved land
- DA or No DA; and others
Guide to LVR's and interest rates
Subject to the above variables, the below is a guide to LVR's and interest rates:
- LVR: <50% - 80%
- Interest Rate: 6.5% - 9.75%
- Establishment Fee: 0.65% - 1.95%
How can we help?
Choosing the wrong land bank loan or worse, incurring default fees and interest, could cost you hundreds of thousands of dollars in both financing costs and equity. The team at DFP have the necessary qualifications, experience, and most importantly, track record that you can trust.
Explore your Land Bank Loan options today
Matthew Royal
Director