@billyjames Had the exact same thing happen with us 14 years ago with the same bank, queried it will the broker 5 times and got assures it was interest only. first and only time I will use a broker as there were various other issues I had to fix for them. Ended up ok, hopefully your build time isn’t too long. We had 12 months but managed to deal with it. The broker did commit to personally lending us $$$ if we needed. I would suggest you make an offical complaint.
@billyjames I would be going after the broker to fix the issue - check if they made sure that they declared your rent expenses while building to the bank, presumably you declared that to the broker. If they had, and serviceability was met, then technically you should be ok - even if you’ll need to tighten up.
If you declared the expense but the broker did not, then they have a problem.
@billyjames Bank SA doesn’t offer P&I construction loans?
If this loan was to build and is being paid out in stages to the builder, then it will be marked as a construction loan in their system and be IO.
Are you sure you don’t have two loans, one for the land (which would be P&I), and the other for the construction (which would be IO)?
@soldieroflogos I stand corrected, although the original post stated South Australia Bank (which has since been edited), hence my assumption.
Website for Adelaide Bank doesn’t state repayments required for construction loans so I can’t be sure if my original point stands. Although I do note that the fact sheet only notes an IO rate for construction loans.
@fwrmr Wrong.
They’re renting while they’re building, hence they needed an interest only loan - which is standard practice for construction.
Once build is finished they move into the new house and stop renting, so the rent money is the current short term problem not the P&I.
@mollym029 The rent will already have been factored into the banks serviceability calculations.
Perhaps due to other reasons the bank was unable to offer IO on the construction loan, but could approve both P&I, and this was miscommunicated between OP/broker/bank.
@lightdreamer No it won't have been. We look at post loan position ie. Once the construction is complete.
The onus is just on a banker/broker to also ensure that there is a sufficient savings buffer to cover the rent expense until construction is done. That said asset position is almost never verified unless you have a really high LVR so it is often inflated.
