Hi there,
Am so excited to have just discovered this forum, what a great resource!I have a unique kind of situation and I'm interested in what peoples opinions may be.
My partner and I own an investment property in Qld (purchased in 2006). My mother is wanting to buy a property in NSW but is short on funds, so we are investigating ways that we could possibly contribute – 1) so that she can obtain a reasonable property to live in, and 2) it would be a mini-investment for us.
We do not have any savings right now, but are wondering if we could use some of the equity in our property to bolster her up – likely a maximum of $40,000. This of course will depend on what our property gets valued at which I am looking in to now.
Does this sound too messy? Any advice would be really appreciated, I really would like to help my Mum stop throwing her money away on rent!
Thanks in advance.
ClareNo major issue if you have equity. Most lenders will let you go up to 80% of you home or 90% with mortgage insurance. Assuming you can service the debt.
Re your mum, you will need to make sure she can afford the repayments – might cost more than renting. You might deed to tip in some cash on a monthly basis.
Hi Clare
Might need some further clarification to decide which is the easiest and cleanest way of structuring this.
You mention that you want to help your mother out however also want to use the property as a mini investment for you.
Who will be owning the property ?
This is important as if the Title is in your name then will your mother being paying you market rent.
If the Title is in your mothers name will she be paying you interest on the portion of the deposit lent to her.
95% lvr is still available even with a gifted deposit from you however costs will start to increase so you might want to think twice about this.
Where is the Qld property ?.
Might be worth getting your Mortgage Broker to commission a valuation on the property to see what numbers you have to play with as this will have a bearing on both the structure as well as the lvr.
Richard Taylor | Australia's leading private lender
Thanks for your responses guys.
My Mum has a good deposit saved up and has been told she would be able to borrow the balance of the house value (however – stamp duty & fees would put a dent in this right?). Either way, we feel this would be maxing her out and would stretch finances too thin. Am I right in assuming that any equity we may choose to contribute would be used towards her deposit? Or could it be tied up in to her loan as a guarantee?
We'd prefer not to have to contribute to repayments on an ongoing basis – but rather use our equity to make a one-off contribution that would allow her to borrow less money from the bank.
Our property is in the Oxenford area. The property she's looking at is in NSW and she would be the owner and occupier. She should not need mortgage insurance as her LVR will be at least 70% or less depending on how much we can help.
I still have a few hundred more questions but I'll leave it at that for now and focus on getting a valuation as soon as possible!
Thanks!
best way would be for you to withdraw funds or borrow more and on lend them to mum. That makes things easier and safer as you don't need to use your property as security for her loan – which a bank is unlikely to do anyway.
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
Lenders often allow you to include the fees in the mortgage taken out on the property (the stamp duty and the fees). Look into this…
Clare, Is this your mum's first home purchase? If so then she would be entitled to the FHOG.
cheers
SonyaTerry I think the approach you suggested does simplify it a lot – I will look in to doing this as it's probably the most straight forward way and would minimise any long term risks we'd have to take against our investment.
Thanks for your help everyone.
Clare
Make sure you seek legal advice. I would get a loan agreement drawn up and a second mortgage maybe – to protect your interests if your mum is sued.
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
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