Finance for building on inlaws block (KDR)

So I am looking to build on my inlaws block.

The current scenario is My fiances father passed last week, and her mother is living in a dilapidated house. It should be condemned. There is no two ways about it, it needs to come down. Her Mother owns the house and block outright.
Kerbside valuation is 600k. SE suburbs Melbourne, Chelsea. Owned since 1983 and has been PPOR for 30+ years

My fiance and I were thinking of demolishing it and putting a nice big house on it for all of us to live in. The only thing is we dont want to pay stamp duty on any transfers of titles to us. We want the mother to retain rights to the title (shes a bit funny like that anyways).

So we were hoping to utilise her as a guarantor for a 400-450k construction loan to build there. Does anyone forsee any hurdles we may need to jump? We figured that with an asset so large covering the loan, the bank would be silly not to take it. My fiance and i are both only children and there is no other potential claim to her inevitable inhertiance of that block, and thus the home we wish to build on it. We are planing on living in it till well past her mother future passing and would constitute our an inheritance of mothers PPOR to fiannce's and my PPOR avoiding stamp duty.

Her mother is not working and not likley to be employed. Fiance and i have combined income of 145k and a new 355k mortgage of a build we just finished. We have approx 30-40k equity. Total disposable cash monthly is approk 3k. So we are very much in a position to service the two mortgages during the constructions pkhase, and are looking to rent out the home we are currently in when the build is complete.

Any advice on this set up would be greatly appreciated.
 
The challenge here is that Mum owns the property but won't qualify for a loan, the kids have the affordability.

Generally speaking, the owner of the property needs to be the applicant for the loan, and kids generally can't guarantee a the affordability condition of a loan for parents.

One solution is to become joint owners of the property, at least 10%. There may be some scope to achieve this within your fathers will; you'd have to consult with a solicitor.
 
father passed unexpectedly - no will, mother survives him an is sole owner of the asset. So what your saying is that a guarantor who owns the asset to a value well exceeding the loan wouldnt be considdered a good deal to the bank?:(

Im trying to avoid paying stamp duty here given there are already going to be costs asociated with knocking down the home.

In all possible scenarios that could occur if the loan couldnt be serviced for one reason or another, the guarantee would cover the loan and then some.

Another thought I had was having the mother party to the loan. Servicability would come from 2 of the three pople, with a significant amount of equity fronted by the other party.Thus the risk profile to the lender is lessened significantly.
 
I can see a whole host of legal and lending issues.

Banks won't generally lend to some to build on someone else's land. Generally buildings are attached to the land and are owned by the owner of the land. Any title holder will have to go on the loan. They do not like guarantees from non owners or non spouses.

Will be very difficult to get finance unless the owner of the land is working.

I can see at least 10 legal issues as well which you may not be aware of. Seek legal advice before doing anything.
 
hmm would the scenario be any better if my finace was on the title - EG her mother, and her on title, with finace and i servicing?

segue to second question, can there be a 50% split in ownership of title, and if so, would this attract a smaller stamp duty, or is the SD aplicable across the entire value (despite only owning 50%)?

Would just copping a full title transfer to my fiance from her mother just be the best bet? Would like to avoid this cost if possible. If unavoidable any idea whether lenders would look at financing that as part of the overal loan structure? 30k is not something i have lying around at the moment.
 
mum is not on benefits yet. Benefit scenario has been reviewed and considdered. (Granny flat interest - retain lifetime right to live in property. asset should be exmpt form the assets test as it is mums PPOR, and not other assets or income)
 
father passed unexpectedly - no will, mother survives him an is sole owner of the asset. So what your saying is that a guarantor who owns the asset to a value well exceeding the loan wouldnt be considdered a good deal to the bank?:(

Im trying to avoid paying stamp duty here given there are already going to be costs asociated with knocking down the home.

In all possible scenarios that could occur if the loan couldnt be serviced for one reason or another, the guarantee would cover the loan and then some.

Another thought I had was having the mother party to the loan. Serviceability would come from 2 of the three pople, with a significant amount of equity fronted by the other party.Thus the risk profile to the lender is lessened significantly.

It's great that your Mum owns the property outright. The bank will be very happy that there's a large amount of equity in the project.

Equity does not equal repayments however. If Mum can't afford the loan repayments, then the bank can't fund the project. All the strong asset position means that if she were to get a loan, when she defaults on the payments the banks will get their money back. I know that you wouldn't let that happen, but the bank doesn't (and legally cannot) see it that way.

If you aren't on the title of the property in some capacity, lenders will not consider your income as capacity to pay the loan. Its that simple. Your income is needed to qualify for a loan, but unless you're not on the title it cannot be considered as you have no legal interest in the property.

For you to apply for a loan (which your Mum will need to be part of), you will need a reasonable stake in the ownership of the property. Most lenders require at least 10%.

This may require stamp duty. It may have implications on all sorts of things including your Mum's eligibility for the pension or other benefits. You need to seek property and specific advice.
 
hmm would the scenario be any better if my finace was on the title - EG her mother, and her on title, with finace and i servicing?

segue to second question, can there be a 50% split in ownership of title, and if so, would this attract a smaller stamp duty, or is the SD aplicable across the entire value (despite only owning 50%)?

Would just copping a full title transfer to my fiance from her mother just be the best bet? Would like to avoid this cost if possible. If unavoidable any idea whether lenders would look at financing that as part of the overal loan structure? 30k is not something i have lying around at the moment.

If fiance is on title she could go on loan with mum. You may go on a loan too if you are considered a spouse.

Mu coudl transfer a 50% share to fiance. duty on the value of the transfer.

Best bet may be to borrow against other property you own and lend to mum to build. You then pay her a rent to live there. If she dies your loan is paid out and fiance may inherit duty free (or she may not inherit!)
 
. So what your saying is that a guarantor who owns the asset to a value well exceeding the loan wouldnt be considdered a good deal to the bank?:(

.

I know its been covered but I thought I'd stress what you are perhaps overlooking here. It's not all about whether its a good deal in terms of the security cover for the lender. ...What happens if the loan goes into default? The bank is left having to exercise their rights under the mortgage by selling her up or forcing the issue with a repossession, throwing the old lady out of her home. All the while the rest of the family and A Current Affair saying why did the ******* bank allow this.
 
If fiance is on title she could go on loan with mum. You may go on a loan too if you are considered a spouse.

Mu coudl transfer a 50% share to fiance. duty on the value of the transfer.

would be considdered defacto - 11 years, engaged.

So duty is payable on the value of the transfer only? excellent.
 
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