Thursday, May 20, 2010

Mortgage question. My husband and I want to build on parents land. Can we get a mortgage to build?

My husband and I want to build on my parents land. Can we get a mortgage to build without owning the property? My parents want to keep the land in their name. Would we be able to do that? Would the bank give us a loan to build on my parents property?


The bank won't give you a normal mortgage based on your parents owning the land. However, there might be a couple of options.

If the parents give you a long term leasehold, for instance they give you a 40 year lease on the property - say for $1 a year, or month, or $1000 a year, whatever, then you have an ownership interest via the lease. This is basically what a lot of commercial properties do. They lease the ground and own the building.

The negative for this is that you won't get anywhere near a 100% loan - maybe 60%or 70% of the valuation, so you will need to come up with a good down for this,

The second would be if they bring you in on ownership to the property, in otherwords you hold joint ownership with them. Then, you can get financing jointly.

A final way is with a family trust. You set up a real estate trust to handle the property. The trust gets the financing and builds the home. According to the terms of the trust, the home belongs to you, while the land remains the property of the parents. The problem with this is the land doesn't stay in the names of the parents, but goes into the name of the trust, although it will remain the parent's property, so they may not go for this. Talk to a good real estate and probate lawyer about the options.

Hope this helps

Nope. You'd have to be on title as well. Otherwise, how could they possibly reclaim the collateral?

I'd consult a real estate or tax attorney to see how best to do this.

No. You would have to be on the deed of the land. They dont have to give you the land just get a new deed with your name and theres on it that should be enough. Just call your lender and ask. But that does mean you and them own the land. Not them solely. I know for a fact they wont give you a loan to build on some one else land your name must be on it.

The bank will probably want the property in your name. If it's going to be your house, why wouldn't the parents NOT want to get their name off of it, just in case you have to foreclose or something happens? That's what the banks keep in mind, "What if?" Also, if something happens between you & the parents, they can have the property & leave you with a mortgage for nothing. You could sign a 99-year lease or something for the land from the parents. You can lease land and own the improvements, but not many banks work with lease-holds. Ask around, but I don't think that is the best way to do it. Can you buy the land from your parents?

Maybe if they gave you a 99 year lease and cosigned the mortgage.

Then if they foreclosed at least they could get the money from your parents.

Do you really want to build on land you don't own? What happens if your parents get mad at you and kick you off the land? What if they die and leave the land to other people?

Your house would be part of their estate and could be sold to pay for a nursing home.

Ask them to sell you one little tiny corner of the land even if it is only 7000 sq ft out of 20 acres it would be your little lot and your home not a house you paid for but never really own and couldn't ever sell.

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