Purchasing a site - interest rates

[jryan]

Just wondering has anyone purchased a site recently and needed a bank loan. I don't intend building for a couple of years so i will need a load until then. When speaking to my local bank manager, she stated that a mortgage rate would not be available as it was land we were dealing with. Has anyone checked the market as to what kind of interest rates are avialble to someone purchasing land/site? Is this a competitive area? Which bank offers the lowest interest rate? She mentioned 6% but that seems alot. Any info appreciated.

 

[Plywood]

Just wondering has anyone purchased a site recently and needed a bank loan. I don't intend building for a couple of years so i will need a load until then. When speaking to my local bank manager, she stated that a mortgage rate would not be available as it was land we were dealing with. Has anyone checked the market as to what kind of interest rates are avialble to someone purchasing land/site? Is this a competitive area? Which bank offers the lowest interest rate? She mentioned 6% but that seems alot. Any info appreciated.

They will more than likely offer you a Cost of Funds based rate (or a Prime rate).

Current 3 month (practically variable) COF is about 2.3% and the bank will put a margin of somewhere between 1.5% and 2.5% (in most cases) onto that. That would give you a rate of roughly 4.75%. She might be considering it as a bridging loan which might push the margin up to 3% (total rate 5.25%).

Still alot better than personal loan rates 7 - 10%. You see if you let the planning lapse on the site, it could really only be a field, depending on the attitude of your planner to giving you planning a second time (some planners dont tend to give it again if the person lets it lapse). The bank would then have very little security, plus they hate bridging loans so they wont be giving it to you at a low rate.

Prime rate is currently about 2.65%. As it incorporates about 0.5% of margin, the margin would ususally be about 0.5% less example P + 2.6% = 5.25% (as above).