So you’re buying land in a bushfire prone area? Or renovating a home in a bushfire prone area? How do you get finance?
Learn more in this video about what lenders will look at, and what you need to consider when applying for finance in your new build or renovation project.
In this video, I speak with Amy Beattie, Mortgage Broker and owner of Good Green Home Loans.
Good Green Home Loans is here to help you find the right home loan at a great rate – using only environmentally responsible lenders who aren’t using their profit and power to support the fossil fuel industry.
In this video, I asked Amy these questions:
- What are some of the considerations you need to make when purchasing land in a bushfire prone area, to set yourself up for better chances with your finance applications?
- If you’re renovating an existing home in a bushfire prone area, what will lenders look at to see if you’re viable for borrowing for your project?
So let’s dive in.
Amelia Lee + Amy Beattie (Good Green Home Loans)
[Amelia Lee]: Now, in terms of purchasing land in a bushfire prone area, what do you need to consider in terms of setting yourself up to have a better chance for with your finance? If you’re looking … This is a thing, like we’ve … The recent bushfires, there’s speculation that more land will be zoned with bushfire overlays. People might have been looking in an area previously in the last five years that might have had a bushfire overlay added to it.
It’s quite surprising some areas that are bushfire, do have a bushfire overlay. There’ll be places in suburban Sydney that might be near a thin sliver of National Park that then have a bushfire overlay on them, that becomes a big surprise during sort of people’s due diligence.
How do you suggest that they set themselves up so that financing doesn’t become a problem in that scenario?
Yes, it’s a tricky one. Because often you’re, you know, you’re looking at land and you haven’t even started to go down the path of them constructing on that land and that project itself … And if the construction project doesn’t match the land’s requirements from a building and planning perspective, then you’ve … if you’ve gone ahead and bought the land, then you can’t do what you want to have as the final project. You’re in a tricky situation so …
A very expensive caravan park, yes!
I think sometimes when I’m driving around different parts of the area that I live, I’m in Melbourne, the morning can potentially you often see fences up around blocks, and they’ve been there for a long time. And it’s like we almost got started here and then it all came to a halt.
[Amy Beattie]: So again, it’s that RESEARCH-RESEARCH-RESEARCH factor, but when it comes to buying land, it’s definitely knowing and understanding the restrictions of the Council, and all of the overlays.
And anything that you can find out, you know, even if that’s whether it’s heritage, cultural overlays, bushfire overlays, there’s many different things that can affect whether you can do what you plan to do. So it’s… take your time, don’t jump in because of the view from the land.
Yes, I guess it’s a simple… It sounds like a very simple answer, but that that’s it. You really need to be fully aware of all of the restrictions so that you can figure out whether you can work with them or not.
Yes, and I think too, it’s that thing … The bank’s going to find that out anyway, because the bank’s going to do that as part of their due diligence of valuing the land, so you might as well be ahead of the game, and know that information before you start asking for money to purchase it.
Yes, absolutely. And you know, you can’t think of them as two separate transactions. You have to really have a pretty clear idea and pretty well researched project for the build before you buy the land.
So again, that can be tricky because you’ve got a real estate agent saying, you know, ‘I’ve got three buyers looking at this, and it’s probably going to be gone tomorrow’. It’s hard, it’s impossible to say don’t get caught up in the emotion of all of that. But if you do, there’ll potentially be really significant consequences.
So take your time, there’ll be plenty of land. And there’ll be another one, trust me. I guess I probably … I say that a lot. And it does feel like sometimes I’m the person that people don’t want to hear what she has to say, because the news isn’t all just rainbows and baby animals.
Just a dream killer in your part time! It’s alright, I often feel like that too. When homeowners come to me and say ‘oh, I want to do this, and this is how much money I’ve got to spend on it’. And it’s like… Those two things are a long way from each other. And yes, you do (feel like a dream killer) …
[Amelia Lee]: But I always feel that my attitude is, and I can imagine it’s your experience too, is that even though you’re the deliverer of bad news, you know it’s news that is much better heard early, rather than another 12 or 18 months down the track when you’ve already – when you’ve invested significantly more money, effort and energy. And that it’s always possible to dream a new dream, and one that actually is true.
[Amy Beattie]: I love that.
[Amelia Lee]: And one that actually fits all of the criteria rather than just a couple. And the new dream that fits all the criteria often actually ends up being a better dream.
So for me, it’s… I see that time and time again that there’s always that horrible, demoralizing initial moment of disappointment, because there’s been so much banking on this working out. But inevitably once everything else gets into alignment, I’d say it generally always creates much better results in the long term.
The sooner you can get to that point of ripping off the band aid and finding out the bad news, the better. Better armed you are to not waste any more time.
[Amy Beattie]: Spend all your effort in the right areas or the new areas that you need to.
[Amelia Lee]: Definitely. Now in terms of looking at renovating in a bushfire prone area, obviously there’s going to be similar considerations. But with these a lot of people would have bought houses that aren’t up to code. And as part of renovating, they need to bring the entire house up to code, which may be a bigger spend than what they initially bargained for.
How do you see that relationship with the lender, the assessment of risk? And the conversation about what their spend of the project is to get the result that’s required from a code point of view, from a value point of view, all of those kinds of puzzle pieces coming together.
[Amy Beattie]: Yes, the bank still uses all … Is still assessing all of the same things. So it’s going to be about the balance between how much you spend and what you’ll have at the end, when you’ve spent that money. It’s going to be about the increase in the loan repayments and your comfortability with that. And the impact of those increased repayments on your family and your lifestyle, and is that something you want to sign up for? Or whether you have to think about walking away. There’s all the same things to consider.
It comes down to, again, speaking to the finance experts early so that they can help you work out what your potential hurdles will be. And with those hurdles, what ones you can mitigate, and want to mitigate and want to therefore pursue, or what you don’t. And when you know… Where you cut your losses.
So it’s not really too much different, to be honest. The best place to start will definitely be where you currently have your finance, because that bank is already involved in the risk, so they’ll want the property to be back to being saleable and a risk free property again. Sooner rather than later.
So they’re going … They may well … And all banks will have a level of this, where they’ll be willing to go, and able to go outside the black and white rules that they would normally be bound by, because this is already a property that they have a mortgage over and have some skin in the game. So, in that situation, you’re probably best to start with your bank because they’re more likely to have to help ultimately.
I think too … What I see is really interesting with the renovating piece, it’s almost… It’s quite different to the building new, is that there’s a bit of a chicken and egg process where you’re sort of looking at ‘okay, we’ve got this property, we’ve got this existing house, we might have X amount of equity in it. We’ve got capacity to extend our financing all things being equal to Y. That means that we’ve got this amount of money to play with in terms of renovation’.
[Amelia Lee]: Now we need to do a little bit of work in finding out ‘okay, what is the constraints on our property? And what … Invest in some consultant help to look at what does the bushfire overlay mean, what does that mean in upgrades to our house? What does that mean in terms of have what that money might bias and where that money might need to go? And then is that money then enough? And does that look like what we kind of need to get as a finished picture?’
And it can be really tricky for people because that feels like they’re actually having to spend a lot of time, and make a lot of decisions, and speak to a lot of people, and potentially pay some professional fees to get to that point of going ‘yes, okay, now we can do the thing of applying for the additional finance and hiring the architect or hiring the designer, or speaking to the builder in a more formalised sense’.
You actually have to do a fair amount of due diligence to even get to that point, particularly when you’ve got a bushfire overlay and you’re doing a renovation because different areas will see the work that you have to do to the existing house differently. And in some cases that may actually be more affordable for you to demolish the existing house and build a brand new house that meets code rather than you trying to up spec the existing house to the standard that it needs to be.
Do you see people sort of really struggling with those early stages of ‘how much work do I need to do to get to the point where I’m like… Why can’t somebody just say yes or no to me? How much work do I need to do to suss this out? When am I doing too much research and disappearing down a rabbit hole?’ You know, all of that kind of work.
[Amy Beattie]: Well, I mean, from my side of things, the conversation always starts around ‘how much can I borrow? How much will the bank lend me?’ And it’s a little bit risky sometimes to sort of just stop there and say ‘it’s this number’, only to find that the client takes that and literally runs with it, and ends up doing so much more than maybe they would if I just sort of said ‘why don’t you do your research about the cost first, and then we’ll work to that’.
So yes … I haven’t personally assisted somebody in that situation where they’ve had damage from bushfire and just needing to, or wanting to, get back to the house they had before. Or something similar or maybe something with a few nice improvements. You know, in my role it’s about talking through those … But also asking lots of questions so I can work out what type of client I’m speaking to here and whether if I tell them the number the bank is likely to say yes to they’ll just run with it and spend more than they wish they had. So it’s a balance of all those things, too.
Yes. It must be really interesting to try and assess that … Because you’re dealing with money mindsets and attitudes to money and attitudes to process and those kinds of things at the same time as…
I need a psychological exam first as well! Just to see strengths and weaknesses! So absolutely it’s multi layered, and I’m very … I become emotionally invested in the transaction with the client too. I always do. So sometimes, the more you get to know them, the more invested you are as well. But I wouldn’t, you know, I wouldn’t do it any other way.
[Amelia Lee]: Yes, that’s gorgeous. That’s the kind of broker I’d want on board too! You want somebody who’s gonna celebrate with you or commiserate with you!
[Amy Beattie]: Ride the highs and the low!
[Amelia Lee]: For sure.
This interview is part of our Rebuild + Build Better series.
Be sure to stay tuned as we share more information and expertise in helping you rebuild after bushfires, or build homes more resilient to climate conditions and in bushfire prone areas.
Resources mentioned in this video:
Get in touch with Amy here >>> https://www.goodgreenhomeloans.com.au/