Mortgage question. My husband and I want to build on parents land. Can we get a mortgage to build?
Written By: admin on July 20, 2009
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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?
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Tags: land mortgage, mortgage, parents
The bank won’t give you a normal mortgage based on your parents owning the land. But, 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 excellent 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 excellent real estate and probate lawyer about the options.
Hope this helps