In all honesty I’m not 100% certain what this means but we received a letter from our solicitor on Friday noting “the Survey Plan relating to our purchase has registered in the Titles Office” (which seems to be the Department of Natural Resource and Mines, Queensland). We now have a settlement date of 20 March—finally!
Like I said, I don’t fully understand what this means, but I think the land developer has now completed the necessary developments for the land we’re purchasing and the rest of the development (sewerage, street lighting, paving, etc). We’ll still need building plans to go through council, which can likely start only now (or post-settlement).
The solicitor also sent a draft settlement statement, part of which caught my eye.
Specifically, the bank (that is, the bank covering the main loan for this investment property) will be advancing around $185,000 at settlement and we are required to make up the balance.
Now we’re fine to do this through the line of credit we established to cover the 10% of the purchase price and costs but my naive assumption was that our main loan would be drawn down in full for the land purchase and part of the construction costs, before we’d start drawing down the LOC.
But of course that would be too simplistic. More importantly, to the banks thinking anyway, we could theoretically run out of money to pay for the build. No build means no income, which to the bank means greater risk that we’ll default on the mortgage. The bank which holds our main loan has no idea about our LOC.
No matter, we’ll do things this way and everything will balance out in the end. It does mean we’ll have to pay a tiny bit of extra interest because the interest rate on our LOC is slightly higher than that of our main loan. At least it’s all deductible interest.
I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.
Enjoy,
Michael
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