Who this covers: investors and builders doing a duplex, a three-to-six townhouse project, a battle-axe subdivision or a knock-down rebuild into multiple dwellings.
What lenders do differently
Residential construction loan or development finance
Up to about four dwellings on one title, many residential lenders fund it as a construction loan assessed on the borrower's income and the end valuation, at up to 80 per cent. Beyond that, or where the plan is to sell, it moves to development finance: assessed on the project's gross realisation value, usually 65 to 70 per cent of it or 75 to 80 per cent of total development cost, with presales sometimes required.
The end valuation and the feasibility
The lender's valuer reports the on-completion value of each dwelling and the land value as is; the loan is set against the lower of the lending ratios. A feasibility with land, build, professional fees, holding costs, GST and selling costs, and a margin of 15 to 20 per cent on cost, is what the lender reads first.
Deposit, costs and holding
Equity in an existing property usually supplies the deposit as a separate split; the equity calculator shows the usable figure. Interest during the build is capitalised in development finance and paid in a residential construction loan.
Keep or sell
Keeping both dwellings means refinancing to investment loans at completion on rent and income; selling one and keeping one reduces the end debt. New dwellings are treated differently from established under the negative gearing changes; GST and the margin scheme on a sale are the accountant's territory.
Worth knowing before applying
Subdivision and strata registration timing decides when the dwellings can be sold or refinanced separately; a builder's fixed-price contract and the development approval come before approval; and the construction loan calculator shows the drawdown by stage.
The tools that fit
Policies on all of the above differ lender to lender and change without notice; the value of the conversation is knowing which lender's policy reads your payslip best on the day. Understanding how your income is read before you apply is what makes the application calm.