Subdivision Loan

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How Much Does It Cost to Subdivide Property?

If you have a large property, you may want to investigate dividing the property up into separate lots. This could allow you to sell off the lots or construct new homes on them for rental purposes. Regardless of the reason, subdividing a property can allow you to access cash in bulk or a steady cash stream if you decide to rent the property out. Either way you need to understand that, though the process is done all the time across New Zealand, it isn’t over night. There are forms, applications fees, and surveys that need to be done as part of the approval process. All of this takes time and money. You shouldn’t start the process unless you fully understand the implications of your actions.

Because subdividing a vacant lot or prime real estate is an excellent way to access land value and improve your cash flow, the subdivision process is highly sought out and can be a significant return on investment. For a brief introduction to the process, read the description below. For more detailed information on the types of loans that you could get as part of the process you should always speak to a financing expert, a mortgage broker, who can detail the types of financial products you could get as part of your land development loan.

Why Subdivide Property?

It is highly important to start thinking about what your end goal is. How you want the final product to look absolutely affects the steps that you will need to take. Sure, there are standardized parts to any subdivision action. However, if you are looking to do anything with land, you will be asked the same questions by everyone. What do you want to do with the land? Let’s discuss your options first.

Subdividing land is a great way to get rid of excess land that you don’t need. If your current lot has areas of unused space, you may want to subdivide your plot and sell off the extras. This would allow you to get money for your land without having to move. If you are buying a large plot of land to build a home on, you could subdivide the lot to raise funds for the total purchase price of buying the land and building your dream home. Further, maybe you own a farm or a ranch, or inherited one, and are looking to retire or sell and move elsewhere. Subdividing the land into sections each with a home is an excellent way to retire on a bang and live comfortably afterwards.

Regardless of the reasoning, you need to know if you are just subdividing to sell the bare land or if you are subdividing to build on and sell with a house. If you sell with a constructed house there will be more paperwork and fees, but the upside is much more lucrative. Let’s talk about the process next.

What is the Subdivision Process?

New Zealand has specific procedures for how to subdivide a piece of property. These can be found in your city council codes. Here are the procedures for Aukland also has its Unitary Plan under this plan areas of the city are divided into “zones”.  Each zone has rules specifying things like:

  • what can be built
  • how high can it be built
  • how land can be used
  • what activities can buildings or land be used for (housing, offices, business, light or heavy industrial, etc.)

The rules for both cities cover things like how far apart houses have to be, how much outdoor space they need to have, how many dwellings you can be built on a site, etc.  The generalized plan for a subdivision in either city has the ten following steps; however, because of its complexity and saving time, money, and headaches, before beginning step one, you must seek an experienced professional’s advice.

The general subdivision process is as follows:

  1. Complete a Site Survey and establish any present and future engineering issues.
  2. Design subdivision’s layout, and prepare the “Resource Consent Application” to the relevant Council.  Additional consultant’s reports may be required depending on step one’s results.
  3. Lodge application with Council. Expect to address questions and deal with additional raised issues.
  4. With Council’s “conditional” approval, typical conditions include:
    4.1 Engineering (construction of drainage, drives, etc.)
    4.2 Survey (Easements and legal plans)
    4.3 Certification & Inspection (proving things have been done as required).
    4.4 Financial contributions (as required)
  5. Engineering or building consent plans may need preparation and Council approval before construction.
  6. Construction.
  7. Legal survey work completed.
  8. Lodge survey plans with Land Information New Zealand (LINZ).
  9. Apply for completion certificate from Council after Resource Consent conditions have been met.
  10. Apply for titles

It should be known that not all land can be subdivided. The above describes the process once you understand and determine that your land can actual be developed in the way that you want. Learning about the cost to subdivide property is useful but not when it can’t solve your land issues. The Auckland Council advises that a subdivision cost can be well over $100K for a two-lot subdivision that would include Record of Title, applications and approvals, and any and all professional fees. Further, if your subdivided lot doesn’t have access to utility services and vehicle access, you will most likely need to include those infrastructure costs as part of the overall project costs.

How Much Equity do I need for a Second Mortgage?

You will only be able to borrow up to your LVR rate. This is because there is an inherent risk in the loan industry. If a house needs to sell, it usually sells for below asking and below the mortgaged value. Lenders know this and traditionally won’t allow a home to be mortgaged for more than the LVR level of its appraised value.

It all depends on the client and their needs.  We will look at a client’s full financial background, credit history, serving ability, and the home’s equity; assuming all pass, we start with the existing bank and a top-up loan, which will be both the cheapest and fastest option.  Then comes a second mortgage or non-bank loan.  Both of these options apply the 80% LVR rules.  Like with our example above, your equity and LVR value could provide you up to $220,000; that is a nice chunk of change that your home has built up in equity.

A non-traditional financer, like a non-bank financing lender, can offer second mortgages with higher home equity percentages. Though your bank may be unwilling to provide you with up to 80% LVR, some non-bank financiers may be willing to do so. 

What Can a Second Tier Mortgage be Used For?:


  • Personal life event
  • Debt consolidation
  • Business Loan
  • Construction Loan

There are several times in life when you may wish to obtain funds from the equity held in your home.  Depending on your particular circumstance, we will work with you to hone the best option that allows you to make an improvement in your life or solve any problem.  Banks can be less hospitable or not offer what you are looking for when trying to obtain a second mortgage and you therefore may need to go with a non-traditional lender. Non-bank lenders can offer funds much quicker and without as much red tape as a traditional lender, which may further aid your particular needs.

Second Tier Mortgage Lenders in NZ

A second-tier mortgage lender in NZ is not a bank. It is not a traditional financing organization but specializes in offering loans to all types of people in varying situations. These groups are also regulated, trusted, and organized to offer highly personalized and specialized loans to people that otherwise would not be able to obtain a loan from a bank.afford a home or a second mortgage. If you are looking to improve your life or solve a problem using your home’s equity, you may need to go with a second-tier lender. Second tier does not mean that it is less money or of lower quality than a first mortgage. It is just a legal categorization. Talk with your mortgage broker today to learn what each type of financing partner can offer you in the way of specialized loans for your specific circumstances. It may be that though you can afford a first-tier mortgage, a second-tier lender will provide you with better financial solutions You won’t know until you reach out and work through the numbers together.

Can You Get a Subdivision Loan or a Land Development Loan?

Don’t let the idea of all this work stop you from learning more about the process. This isn’t something that is easy but is incredibly rewarding in the end. If you don’t have an extra $100K+ in a bank account to use for this process it is best to engage with a mortgage broker who can help educate you about the cost to subdivide property and a subdivision loan or a land development loan.

A subdivision loan or a land development loan is developed based on your end goal. Will you subdivide the property with the goal of building, or will you be subdividing only with the intent to sell off some spare land? The type of subdivision loan or land development loan that you get from your mortgage broker will depend on this goal.

What is the Best Way to Plan For the Cost to Subdivide Property?

Think through your plan and write it down. Remember that everything costs money, so make sure you know what you want ahead of time to efficiently start the process. Here are some considerations that Auckland Council advising thinking about: the size of your property, the current zoning of your property, the stability of the soil for construction on the intended new lot, vehicle and utility access to the new lot, and stormwater management on the new lot. Think like a town planner. What would a local city or town council government employee want you to include in your subdivided property that they would do if it were up to them? We can provide the answers to all these questions as we have a town planner as our business partner. Make sure you are making it worth the work for the town and improves the neighborhood. If that is the case it will be welcome. It will sell quickly, and you will have been a proper property developer.