I currently havean investment house in 50/50 shares with my brother, i own my half(don’t owe any money on it at all) and my brother still owes some money on it. how can i use my half to purchase other IP’s. the house is worth over $150k so my share is $75k +. my brother and i don’t wish to sell the property.
Any thoughts would be greatly appreciated.
Ty
Hi Ty,
You mentioned you don’t have any debt on your share of the property,
Unfortunately from a Credit Provider/Banks perspective (with both names on title) you are still accountable for your brothers remaining debt on the property and hence this will be taken into account when the Credit Provider/Banks asses your capacity to service further debt/finance.Also, you will probably find it difficult using your share of the equity without involving your brother, as he is also on the title and will also be responsible for any debt linked to the security/property, Cheers.
Regards
Steven Crane
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
Your brother will definately need to sign for any loan application you submit but you may be able to have the loan in your name only. You can submit with just your own details if his finances are not the best.
TMA
http://www.email4money.info
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First Home Buyer WebsiteOk
At this point in time my brother only owes about $10k on the property, so i don’t think that that will be a problem.
once i beat him into submission to sign the loan documents, where do i go from there???
do i take the loan out and use the house as a guarantee on the loan or is there a better way ie Equity mate. not that i now how that works either.
i have only ever got personal loans not housing loans, i paid cash for my half share in this house, so i am not real sure on the proceedures or the best way to do this.
I am also guessing that i will still need upto a 20% deposit whichever way i go is that correct??thanks again
Ty
The lender will take a ‘mortgage’ over the property. That means that if you do not pay, they take your house and sell it. They take what they are owed after all expenses are added and give you the left overs.
To keep your brother’s liability down, you will only need to borrow 20% plus costs of the new property value on your existing home and you can get the other 80% on the new home. Of course, this assumes you do not have any cash of your own.
TMA
http://www.email4money.info
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First Home Buyer WebsiteI hear when they take posession of the property that it can really screw you over.
They (the bank) virtually give it away and usually to one of their mates. With what left they take out all the trumped up legal fees etc and you might have a few pennies to rub together afterwards.
If you are going to have trouble paying the loan don’t tell them! Most likely they’ll try and make plans to take the property straight away.
I totally disagree with you Caston.
See http://www.prosolution.com.au/articles/howmuch.pdf See page 3 & 4 of the article.
Cheers
Stu
It would really depend on a few factors like the bank or finance company you are dealing with and who handles your case.
It does go on though. While the tellers you deal with when you go to the bank are nice friendly people the ones working up the top of the corporate tree can be quite the opposite.
I’d suggest trying to use the property you are actualy buying as security for the loan. Otherwise you are taking a risk an you need to weigh that risk and mitigate it.
I totally disagree as well. There are very specific rules regarding taking possession and they are very strict regarding PPOR properties. They are more relaxed regarding investment properties but they are still pretty sensible.
Everything is outlined in your loan documents before signing anyway. You are responsible for what happens to you.
TMA
http://www.email4money.info
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First Home Buyer WebsiteYou may both be right but the less risks I face the less I trouble I have sleeping.
I assume you only need to use another property from your profolio as security if you do not have the full funds required for a deposit.
You may only need a fraction of the value of one of your properties but you are risking much more than that fraction by using it as a deposit. You may also have trouble getting approval from an investment partner or spose.
Perhaps when you get a loan to buy a cashflow positive property you also borrow a certain amount to get a margin loan on some very low risk but reasonable dividend returning stocks. Such as in one of the major banks.
Later you can sell these stocks for use as the deposit or keep them and use them as the security.
I personally plan to use a regular geared savings plan to accumulate the initial deposit as well.
Shares are far more risky than using equity in an existing property.
TMA
http://www.email4money.info
Essential Links
First Home Buyer WebsiteThanks Guys this is really great info i really appreciate it.
So let me get this right, i can use the 1st IP as a deposit and then borrow the other 80%, so would i be able to pay the mortgage section off first or would it be there for the life of the loan????
now if i wanted to get 2 more IP’s could i use 40% mortgage divided over the 2 new IP’s and then the rest the new IP’s as 80% each???
once again sorry for being a pain in the rectal passage, but i am only just starting out and the more i learn from you guy the better i’ll be.Hi Ty,
Yes you are correct,
basically you are using the equity in the 1st IP to fund the 20% deposit on future properties,
All loans would be separate, so if you decided to make extra repayments into the 1st IP loan that will be fine, cheers.Regards
Steven Crane
Mortgage BrokerMobile Mortgage Market
Ph: 0402 483 216
[email protected]
http://www.mobilemortgagemarket.com.auPLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.
TMA,
If the shares go down in value the bank will issue you with a margin call where you need to pay back the difference so you are right that there is a risk. Interestingly though it works the other way as well if the shares go up in value you have more equity.
Caston, I am extremely familiar with the workings of shares and margin lending. My comment was regarding risk. Shares are far more volatile than property. Even Bank shares… look at their prices since 9/11.
TMA
http://www.email4money.info
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First Home Buyer Website
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