Hi,
I am in desperate need of some help! Property finance is not my strong suit so bear with me.
My sister bought a 1 bedroom apartment in Melbourne in 2009. She bought it as a first home buyer using the first home buyers grant, which at that time was about $17,000 however now, after living in it for a while she is renting it out and rents a house with roommates elsewhere. She has recently decided that she wants to have more expendable income and has asked me to split the loan with her so we would effectively own the property 50/50. I am keen to take her up on her offer as I am looking to get into the property market but I have not got the savings to do it by myself. I could do it with a friend however due to the time that my sister bought (during the GFC) I feel that I would benefit from the capital growth if I took up her offer. The only problem is working out how to go about splitting the loan now that it is already 2 years after she has purchased the property:
The things I need to consider that I have realised so far are:
repayments already made
deposit
stamp duty
first home buyers grant
rates
water bill
body corporate
land tax
solicitation fees
mortgage registration fee
transfer fee
interestI understand that this is a complicated situation hence me needing some help.
Any information about this type of financial arrangement would be greatly appreciated; is it possible? How does it work? What to include in my debt to my sister if I go ahead? (i.e. would I owe her half the water bill for the period that she owned it or would I just owe purchase costs i.e. deposit, repayments), do the banks support this type of arrangement? (I know you can have a shared loan but I have never heard of someone coming into the equation after the loan has already been taken out)……….?????????
Cheers,
AdamHi Adam,
It’s a hard decision, best thing is to get a property valuation and split 50/50 just as though she is selling to another person.
Be aware you may be losing your 1st home buyers grant by doing this.In terms of expenses, I have found in situations similar it’s best to go 50/50 in everything from the point of purchase, that way no arguments.
Hi,
You could purchase 50% of the property from her at current market value and share all ongoing property expenses. Say property is worth $300,000 (based on say the average of 2 independent valuations which would cost around $300 each but worth it for both your sakes) you pay her $150,000.
On the loan side of things you would probably be best to get 2 loans with you both guaranteeing each other. I have done a loan loan like this but was pre new lending laws and the GFC so make sure your broker or lender is on top of the current lending policies/ lending options before you get too far into it.
– your loan would be for say $150,000 + stamp duty and your half of legal / bank fees.
– her loan is a bit tricky to work out not knowing the current debt amount. She would need a bit of equity in the property if you are borrowing 100% +Things to consider:
– selling her half would trigger a capital gains event for her
– you would have to pay stamp duty on your half
– may be some ongoing issues for her claiming interest deductions which need to be considered when arranging loans.
– need to have some sort of agreement drawn up to cover all eventualities such as death, financial hardship, forced sale etc.Marty McDonald | Mortgage Experts
http://mortgageexpertsonline.com.au/
Phone MeI should clarify I meant she would need some equity in the property is you were borrowing 100% + of your half share of the property.
Marty McDonald | Mortgage Experts
http://mortgageexpertsonline.com.au/
Phone Me1. You will NOT be able to get the FHOG with ANY states sorry to say – one of their condition can not be related purchase.
2. 50% stamp duty payable –
3. She will have to pay “capital gain tax”The question is…BESIDE wanting extra “expendable income ” do you guys have any other reason to go ahead with this split??? because in the short term you will be thousands of dollars behind.
If she wants expendable income then really you can be added to a mortgage docs as a guarantor ( not all lenders allow) BUT not as a title deed holder.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks guys, you’ve been a great help!!
If I am added to the mortgage doc as a guarantor does this mean that a portion of the mortgage repayments can be payable by me to the banks? and therefore I can just settle any other costs she has incurred so far personally (this can be done after sale plus interest) so say I owe her $30k in stamp duty, deposit, taxes, etc I will pay her say 10k up front and then settle the rest plus interest once the property has sold. We of course my have to get this written up legally so the property is in my name as well. Can you see any issues with this??
Cheers
Adam1. No you cant have private contract to say the title is 50% under your name….you be overriding the title deed law…it be the same as selling the home to see ( see above)
2. Depending how close you guys are, she can just give you any $$ that was gained from the property during this time once she does sell it- might be able to get a written contract but im not sure…this will be outside my field of expertise.
3. If your added to the mortgage that’s fine- all your really doing is helping her half her repayments and increasing her surplus funds. This options also comes with it’s disadvantages in that if your sister wants to buy a new place while keeping the above arrangeable, her serviceability will not increase just because your paying for half the mortgage because she is still 100% liable for the home ( solo title deed holder).
Unfortunately there are no one right answers, just a lot of options to choose from.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
