Client Case Study: Duplex Finance

A common mis-conception when we have clients applying for a construction loan to build a duplex is that the bank will lend me 100% of the cost to build a duplex because the end value once subdivided will have plenty of equity. Unless you have sufficient equity to begin with or have an additional property attached to the loan, the bank won’t lend you 100% for this finance.

This is because should the bank need to sell your property, they will be selling it before construction is completed and the subdivision of a majority if not all duplexes is completed after the construction is finished so the bank has to sell your property without it being subdivided hence why they cannot consider their valuation based on this.

Recently we’ve had a couple in their mid-50’s wanted to develop their investment property which they purchased 4-5 years ago. The bank did not look favourably on their age or income to support the repayments of this new loan even though they had plenty of equity as they held this property for a period of time before developing. They decided to add their son on title, develop borrowing 100% and at the end of the development split 1 duplex for them and the other as a first home for their son. Age wasn’t an issue as they had their son on the loan, income was no longer an issue and client’s equity position allowed them to borrow 100% of the costs.

If you have a property that you are looking to build a duplex, give George our duplex expert expert at BlueCherry a call on (02) 9897 1039 to book an appointment or email