Iden go between building sept 2012

Iden Loan ServicesIden Loan ServicesGo-Between & Go-Between &

Construction LoansConstruction Loans

www.iden.com.au Correct as at Sept 12, subject to change without notice

What is a Go-Between Loan?

• Offers an easy way to purchase or build a new home before selling the existing home

• Rather than 2 sets of repayments, whilst selling the existing home no repayments are required

• The length of the Go-Between period will depend on whether the customer buys or builds their new home


Go-Between Highlights

✔ Principal & Interest

✔ Interest Only

✔ Fixed rates (from the outset!)

✔ Variable rates

✔ No rate loading

✔ 100% offset (from the outset!)

✔ Lo Doc Loans


Go-Between Loan Repayments

The repayment amount will be based on the end loan which includes:

• Loan amount required to purchase/build the new home; plus

• Accumulated interest on the new loan during the Go-Between period; less

• The agreed amount by which the new loan can be reduced upon sale of the existing property


Buying an Established Home

• A new loan is established to purchase the new home

• Refinances existing loan at the time of application for the Go-Between

• Interest is charged to the new loan as normal and no repayments are required until the existing property sells (maximum of 6 months)


Established Home

• Once the existing property is sold, the customer must pay sufficient funds into the new loan so that it reduces to the amount specified in the Go-Between Loan Contract.

• The customer must be made aware of the interest capitalisation and the need to sell the property at a realistic price, within the agreed time frame.


Building a New Home

• A new loan is established to purchase the land and cover construction costs

• Continue to make repayments on existing loan

• Interest is charged to the new loan as normal and no repayments made on that loan until the existing property sells (maximum 12 months)


How much can we borrow?• Up to 100% of the new home value

plus fees and charges• Combined loans cannot exceed

85% LVR (80% Lo Doc) including any capitalised LMI premium

• Capitalised interest must be considered in the LVR calculation

• Assessment is based on the repayment required once the existing home is sold (End Debt)

• Loans up to $5.0m may be considered.


Application Details• In all cases where LMI is required

(i.e. peak debt or end debt is >80% for full doc and 60% for Lo Doc), cover must be obtained at loan approval stage.

• The LMI premium is calculated on the peak debt.

• Full valuation required on property to be sold. Normal valuation criteria applies on new property.


What if I don’t sell my home in the Go-Between period?

• Once the Go-Between period ends (maximum 6 months established home, maximum 12 months construction) and the existing home has not been sold, repayments will be required on both the existing and new loan.

• Application for extension (3 month) available.


Scenario• Existing property valued at $400k (customer owes $170K to

BankC)• Customer signs contract on new property for $550k and pays a

$10k deposit• Calculate 6 months capitalised interest on the new purchase =

$566,500 less $10k deposit = $556,500 as the peak debt ‘worse case scenario’ at the end of 6 months period

• Iden loan second RM behind BankC

• Option to refinance BankC at time of application

(if opt to refinance BankC loan, customer would make no repayments during the Go-Between period)


Scenario (cont)• Ensure the customer can service the end debt• Customer has two properties = $950k in total value (400+550)

• Total debts (BankB + Iden loan) = $726,500 (170+556.5)• Total LVR = 76.5%• Existing property then sells for $400k – minus $8k sales costs

and $170k BankB loan = $222k• Subtract the $222k from the Iden loan peak debt of $566,500

- this leaves end debt = $344,500 (assuming proceeds from sale takes the full 6 months)


Construction Loans

• Progress payments• Principle & Interest or Interest

Only• 100% Offset Home Loan• Lo Doc option available• Fixed and variable rate options

available from the outset


• FHOG released upon land settlement

• Where the total building cost is greater than the loan amount, the funds the customer is contributing must be paid to the builder prior to the bank releasing any funds

• P&I Home Line available on the land loan component

Construction Loans


Summary• Go-between loans offer an affordable and simple way of bridging

the buying and selling of your own home. This saves you having to1) Sell first… then

2) Move in to Rental …then

3) Buy ….then

4) Move in (two moves)

Now you canA) Buy & Build

B) Move in stress free when you want to

C) Sell your old home – easy (only 1 move)• Construction loans help you with building your dream home, with

loan repayments made progressively during construction.


Economy & Finance

Iden go between building sept 2012