Browse Forums Home Finance 1 Jan 11, 2013 12:52 pm 1) I have an investment property in Bendigo where i am paying interest only to the loan. It has never been owner occupied and has always been rented to a tennant from day one. I am looking to purchase a block of vacant land in a new estate within Sydney. The reason i want to do this is because it's my dream suburb and the prices of land are rising steadily in this area. Within the last 18 months, for a 515m^2 block, prices have gone from 250K -> 330-380K for the same sized land. As a result i would like to buy the land first, lock it down so that the prices don't rise on me, and then build a house on it in 1-2 years. My girlfriend doesn't own an investment property so my preference would be for her to take out the loan, therefore waiving stamp duty. My question is, if i decide to come onto the title in a few years down the track, can i do so and will i have to pay stamp duty myself to come onto the title? 2) If i take out a loan for the land, and start paying it down, in 2 years when i start construction can i modify the loan to include the cost of the house. If a separate loan is needed to be taken out, will i need to pay stamp duty on the new loan? My understanding is that stamp duty only applies to the land, so this is where my confusion ****** 3) Will a construction loan work here? And if so is there a certain period of time where i would need to actually start construction? I would need between 1-2 years to start construction. Re: Buying Land Only in Sydney - 3 Questions 2Jan 11, 2013 11:39 pm Hi, In answer to your questions: 1) If it is your PPOR or vacant land intending to be your PPOR, and you are either married or in a defacto relationship for two years, then stamp duty would be exempt if you came onto title. Note that the lender who has the loan would have to be advised and you would have to be added to the loan. 2) Yes, you can apply for a construction loan when you want to start building. No stamp duty is applicable because stamp duty only occurs when there is a transfer of title, nothing to do with the loan attached to it. 3) Yes a construction loan will work. When you are ready to build, get finance approved at that time even if it is one or two years down the track. Don't need to do it earlier. Before doing this, I would get some legal help to cover both of you. Not saying it will happen but if she has purchased the land on her own and you split up in the meantime, might cause issues. Also with the exemption of stamp duty on initial purchase, you need to clarify what happens if you do come on title down the line? Does it compromise the exemption and it needs to be paid back? Cheers Tom Re: Buying Land Only in Sydney - 3 Questions 3Jan 12, 2013 12:40 am Hi Tom, thanks for your detailed response it is highly appreciated. In relation to stamp duty being exempt, i take it this doesn't apply if i am not in a defacto relationship? We do not live together so i guess this is going to pose problems. In relation to the construction loan how does this work? Am i able to take out an initial loan just for the land, and then a second loan for the construction? Will i get charged anything additional here or have to pay stamp duty a second time? I have heard of loans where you can take a single loan that covers the house and land, and simply pay interest to the land component only until i wait for construction to be completed. I don't know if this type of loan will suit, as we do not want to rush into building and i would rather pay down the land loan first by about 20% before looking at constructing. Another concern i have is that the land title will be under my girlfriends name. When it comes to actual construction of the house, can i take that second loan under my name even though she owns the title? As you can see i have many things to clarify first before deciding on what the best strategy will be for me Thanks for all your help. plc Hi, In answer to your questions: 1) If it is your PPOR or vacant land intending to be your PPOR, and you are either married or in a defacto relationship for two years, then stamp duty would be exempt if you came onto title. Note that the lender who has the loan would have to be advised and you would have to be added to the loan. 2) Yes, you can apply for a construction loan when you want to start building. No stamp duty is applicable because stamp duty only occurs when there is a transfer of title, nothing to do with the loan attached to it. 3) Yes a construction loan will work. When you are ready to build, get finance approved at that time even if it is one or two years down the track. Don't need to do it earlier. Before doing this, I would get some legal help to cover both of you. Not saying it will happen but if she has purchased the land on her own and you split up in the meantime, might cause issues. Also with the exemption of stamp duty on initial purchase, you need to clarify what happens if you do come on title down the line? Does it compromise the exemption and it needs to be paid back? Cheers Tom Re: Buying Land Only in Sydney - 3 Questions 4Jan 12, 2013 2:41 pm mercthunder Hi Tom, thanks for your detailed response it is highly appreciated. In relation to stamp duty being exempt, i take it this doesn't apply if i am not in a defacto relationship? We do not live together so i guess this is going to pose problems. Correct, if no defacto or marriage, then it's as if you are a stranger buying into the land as tenants in common, and stamp duty will be applicable and is calculated on market value at time of title transfer. mercthunder In relation to the construction loan how does this work? Am i able to take out an initial loan just for the land, and then a second loan for the construction? Will i get charged anything additional here or have to pay stamp duty a second time? I have heard of loans where you can take a single loan that covers the house and land, and simply pay interest to the land component only until i wait for construction to be completed. I don't know if this type of loan will suit, as we do not want to rush into building and i would rather pay down the land loan first by about 20% before looking at constructing. Yes, you can buy the land and take out a land loan only initially. The when it is time to build, you apply for a construction loan. What the lender does then is have two different loans, one for the land loan, and the other for construction, where they will drawdown and pay the builder as building progresses (normally in 5 stages). That way you only need to pay interest on the drawdown part. Then once the construction finishes, the land loan and construction loan merge into the one loan as a standard home loan. If you want further details on this, just PM me and I can send you a guide which details this. mercthunder Another concern i have is that the land title will be under my girlfriends name. When it comes to actual construction of the house, can i take that second loan under my name even though she owns the title? The loan must always include the person who is on the title, lenders do allow 3rd parties on a loan application for serviceability reasons, however that really only applies if it is a spouse. Girlfriend wouldn't "fit" into that category. Cheers Tom Re: Buying Land Only in Sydney - 3 Questions 5Jan 12, 2013 2:46 pm mercthunder Hi Tom, thanks for your detailed response it is highly appreciated. In relation to stamp duty being exempt, i take it this doesn't apply if i am not in a defacto relationship? We do not live together so i guess this is going to pose problems. Correct, if no defacto or marriage, then it's as if you are a stranger buying into the land as tenants in common, and stamp duty will be applicable and is calculated on market value at time of title transfer. mercthunder In relation to the construction loan how does this work? Am i able to take out an initial loan just for the land, and then a second loan for the construction? Will i get charged anything additional here or have to pay stamp duty a second time? I have heard of loans where you can take a single loan that covers the house and land, and simply pay interest to the land component only until i wait for construction to be completed. I don't know if this type of loan will suit, as we do not want to rush into building and i would rather pay down the land loan first by about 20% before looking at constructing. Yes, you can buy the land and take out a land loan only initially. The when it is time to build, you apply for a construction loan. What the lender does then is have two different loans, one for the land loan, and the other for construction, where they will drawdown and pay the builder as building progresses (normally in 5 stages). That way you only need to pay interest on the drawdown part. Then once the construction finishes, the land loan and construction loan merge into the one loan as a standard home loan. If you want further details on this, just PM me and I can send you a guide which details this. mercthunder Another concern i have is that the land title will be under my girlfriends name. When it comes to actual construction of the house, can i take that second loan under my name even though she owns the title? The loan must always include the person who is on the title, lenders do allow you to be a co-borrower however you must have some financial interest in it. Cheers Tom Re: Buying Land Only in Sydney - 3 Questions 6Jan 13, 2013 10:08 am Hi Tom, Thanks for your help it is appreciated and has clarified a lot of things. One other question i had was in relation to stamp duty on land. If i was to buy a block of land, let's say for $350K, i would need to pay roughly 11K stamp duty on this. When i start building, do they re-calculate the property value and charge me additional (if the house and land ends up being worth 650K would i need to end up paying 25K stamp duty instead of the initial 11K?). Reason i ask is because if we are only required to pay stamp duty on land, why would people buy house and land packages? Thanks. Re: Buying Land Only in Sydney - 3 Questions 7Jan 13, 2013 10:29 am In WA you only pay stamp duty on the cost of the land when building. It is one of the reasons we ended up building. I bought a dodge unit with my sister 5 years ago so my partner and I now don't qualify as first home buyers (which would mean no stamp duty), not even if he just bought in his name. Re: Buying Land Only in Sydney - 3 Questions 8Jan 13, 2013 2:07 pm mercthunder Hi Tom, Thanks for your help it is appreciated and has clarified a lot of things. One other question i had was in relation to stamp duty on land. If i was to buy a block of land, let's say for $350K, i would need to pay roughly 11K stamp duty on this. When i start building, do they re-calculate the property value and charge me additional (if the house and land ends up being worth 650K would i need to end up paying 25K stamp duty instead of the initial 11K?). Reason i ask is because if we are only required to pay stamp duty on land, why would people buy house and land packages? Thanks. You only pay stamp duty when there is a sale or transfer of property (i.e when there is a change on title). So in your case, you only pay stamp duty once when you purchase land, there is no further charge when you decide to build. Cheers Tom Yeah I don't know why I came to a forum. Place is full of wierdos/pedos thought internet may help but I suppose I'll try my luck with someone in person. Cheers. I tried… 0 6446 Personally, considering your layout (study/work desks in bedrooms), I don't think you have any other option but to leave NW windows and make them as big as possible e.g.… 7 10483 We had this happen to us last year and got charged a variation. Try and give away as much as you can that is usable to charity otherwise if you are in Sydney I have a… 1 4507 |