Browse Forums Home Finance 1 Feb 16, 2011 12:21 pm Hi Guys, My parents, partner and i are planning to Owner build but we're not sure how to do the finance. My parents brought the land and the plan is for my partner and i to put the house on it. We have been thinking that the easiest way to do the finance to OB would be for my parents to get a line of credit against there existing house to build the house and for my partner and i to cover the repayments until the house is built then take out a mortgage against our 50% of the property to pay out there line of credit. We're also not sure at what point in all of this my partner and i should be putting our names on the land titles. If you have any thoughts and ideas please let me know. Cheers, Brendan Re: Finances for Co Owner build? 2Feb 16, 2011 6:49 pm This sounds like it would be pretty complicated from an ownership perspective. Who is going to own what when it is done? If I were you, I would see a solicitor in order to come up with a suitable arrangement that will protect everyone in the case of a dispute (no matter how unlikely you think it will be) or other odd situations. Think about what would happen if either your parents or you and your partner split up (I am sure you don't want to think about it), or if one of the party got sued for some reason. Since it is a group ownership situation that seems to be divided between house and land you may have problems with finance. I would think a bank would be hesitant to lend you money for a house that is on someone else's property. A trust or other legal structure may simplify things here, protecting those involved while giving more flexibility with the ownership setup. Other factors you should take into account are the tax implications etc. You may be able to set it up to provide tax advantages. Speak to a solicitor or a good accountant and find out what your options are. Re: Finances for Co Owner build? 3Feb 16, 2011 8:14 pm BrendanF Hi Guys, My parents, partner and i are planning to Owner build but we're not sure how to do the finance. My parents brought the land and the plan is for my partner and i to put the house on it. We have been thinking that the easiest way to do the finance to OB would be for my parents to get a line of credit against there existing house to build the house and for my partner and i to cover the repayments until the house is built then take out a mortgage against our 50% of the property to pay out there line of credit. We're also not sure at what point in all of this my partner and i should be putting our names on the land titles. If you have any thoughts and ideas please let me know. Cheers, Brendan Congrate on this exciting step of property development and construction! enjoy the ride and learn... Before i give you options, are you (not your parents) a First home owner? Because your parents can buy the land, and you can build the house on top and still be eligible for the FHOG ( http://www.osr.nsw.gov.au/benefits/firs ... ogs/homes/ ) Regards Michael Michael Chan | Australia wide Mortgage Broker Michael@ShapeHomeLoans.com.au | 1300 74 5626 | Fax: 02 8212 8909 http://www.ShapeHomeLoans.com.au Re: Finances for Co Owner build? 4Feb 16, 2011 8:17 pm BrendanF We have been thinking that the easiest way to do the finance to OB would be for my parents to get a line of credit against there existing house to build the house and for my partner and i to cover the repayments until the house is built then take out a mortgage against our 50% of the property to pay out there line of credit. This is slightly confussing?...what are you trying to achieve here....simplicity is the solution to all complex scenario Regards Michael Michael Chan | Australia wide Mortgage Broker Michael@ShapeHomeLoans.com.au | 1300 74 5626 | Fax: 02 8212 8909 http://www.ShapeHomeLoans.com.au Re: Finances for Co Owner build? 5Feb 16, 2011 10:14 pm Yes we are a first home owner... hadn't thought about the FHOG coz of the co ownership just presumed we wouldn't be eligible. The post was a little confusing so i'll try again. My parents brought the block over a year ago and own it outright. Myself and my father will be working away from home a fair but so we decided to build one larger house and both live there so the girls do get so lonely. Also later down the track my parents will be going on a extended holiday using the house as a base. So that we are in it 50/50 it was decided that my partner and i borrow for the building of the house but banks dont like lending for owner builder construction especially if you don't own the land. So my parents suggested the idea of a line of credit against there current house to fund the build then once its built we would take out a mortgage to buy into 50% of the property to pay out the borrowed line of credit. The question is will the banks let you take out a mortgage to buy your part of the co ownership? Re: Finances for Co Owner build? 6Feb 16, 2011 11:19 pm BrendanF The question is will the banks let you take out a mortgage to buy your part of the co ownership Yes, but in this case to be honest im not 100% sure if the FHOG still applies. Sorry since every state have diff FHOG requiremnts it's sometimes hard to keep track with "complex" question like yours From my gut feeling i would say you can, but i know they have a restriction about buying properties from "related parties"...( i will have to check the forms again...) Or you can simply ring and ask OSR. Just to point out: - Stamp duty is payable BrendanF Also later down the track my parents will be going on a extended holiday using the house as a base. ?? i dont understand, what do you mean by using it as a "base"..you mean it will be your PPOR???? BrendanF but banks dont like lending for owner builder construction especially if you don't own the land. Not all banks does this, but there are plenty that allows this transaction as long as you ask the right people and ask the right questions. Presuming something won't help in your situation, it will be costly Mate, speak to a broker that offer a free service, and one that can advise and fill out the FHOG grant for you as well ( because , if the right loan structure is done you can apply for FHOG- saving of $15,000-$20,000) BrendanF So my parents suggested the idea of a line of credit against there current house to fund the build then once its built we would take out a mortgage to buy into 50% of the property to pay out the borrowed line of credit. Yes, this is possible. Not the cheapest way; but it's a option that allows more flexibility. How much equity does your parents have in their current home? Regards Michael Michael Chan | Australia wide Mortgage Broker Michael@ShapeHomeLoans.com.au | 1300 74 5626 | Fax: 02 8212 8909 http://www.ShapeHomeLoans.com.au Re: Finances for Co Owner build? 7Feb 17, 2011 7:17 pm Also note BrendanF - Owners build can run into a lot of trouble in terms of finance and budget....highly not suggested unless you need to. Michael Chan | Australia wide Mortgage Broker Michael@ShapeHomeLoans.com.au | 1300 74 5626 | Fax: 02 8212 8909 http://www.ShapeHomeLoans.com.au Sorry but you have a crap builder. Probably too late now. For our last build I only spoke to builders who would allow me easy access (at no cost). I used my own sparky… 10 7303 If so what were the "special circumstances" under which it was granted? "Note: If the development consent is for 'dual occupancy' an owner-builder permit can only be… 0 10933 Waiting for the interest rates to go down is also waiting for the building prices to go up, you will likely lose. Perhaps you can get the builder to lock up stage, but… 4 2527 |