The situation is my uncle is willing to pay cash for a vacant block of land ($450,000) in Sydney Northern District. He then wants first morgage. What we need advice on is we then would like to borrow $500,000 with second morgage and build a duplex. We are just unsure if money lenders would lend that amount if any on second morgage in this situation. Can anyone who knows how second morgage works give me some advice or any other ideas on how we could make this work.
Thanks ChrisWhat he can do is buy the land, then get a mortgage. When he wants to construct, he then gets a construction loan with the same bank. It is not a second mortgage, but an increase in the first. Many banks will lend based on a % of the end value of the project or a % of the construction costs.
He must still have a good enouggh income to qualify.
Terryw
Discover Home Loans
Mortgage Broker
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry for replying,
This situation is uncle ONLY wants to contribute $450,000 and have first morgage, this will pay for the land. My partner and myself then have to get a loan ie. second morgage to pay for building the duplex, (if this can be done). Then in 5 or so years time when market is right we sell and my uncle will get a percentage and we will. Does this make sense? What we are unsure of is if you can get a second morgage in these circumstances and how the second morgage situation works or if there are other ways to do this?
Thanks
ChrisHi. What will you use as security for your loan? If the land is owned by the uncle, you won’t be able to get finance using this as security.
Terryw
Discover Home Loans
Mortgage Broker
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Chris 82,
another possibility is to form ‘partnership’. He (your unkle) puts in the $450K and together you fill in a joint loan application for the building (ie: a house and land package style set up with a $450K deposit). With all interested parties on the same documents in agreeance (with a written contract between yourselfves and your uncle) it might just work.My understanding of second mortgages is very limited, but I think it only allows you to take up available equity that is left between what is owing on the first mortgage and the actual value of the house. Terry would be better to answer that particular question. My version might be a tad bit over simplified!
Food for thought…..
Cheers
C@34
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