Hi guys
As always, I really appreciate the time you guys take in helping out your fellow man. Generosity is a virtue.
My question is, what type of facility would be possible/appropriate/best in this scenario? I’m open to all suggestions or any comments that you might have.
– Person would like to access equity in mother’s property to use for investment purposes
– Mother’s property is worth 350k (no mortgage)
– Ideally facility would be up to 60% of value, but less is ok too
– Title of property is in mothers name, mother has no income and no other loans
– Person can prove sufficient income to service the loan with money to spare, and has no secured loans as is, good credit rating etc
– The facility may be in place for a year or two, but there will be opportunities to refinance it after thatI understand that there are a few ways to approach this situation and I even have a few options in mind myself, but I would really like to know what you guys have to say.
FYI, the loan will most likely be used to fund the deposit for the person’s first IP first up, and may be used for other things over the next couple of years.
The mother can use a NODOC to access enough to fund the deposit and costs. The purchaser can then borrow the remainder through their own facility secured against the IP.
The advantage of this over the mother going guarantor is that it limits the mother’s risk to the funds she borrows. As guarantor she could lose everything in an extreme situation.
Cheers,
Simon Macks
Residential and Commercial Finance Broker[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Is this what you describe (with imaginary figures): Mother borrows 50k at 7%, she lends this to her son at 7.2%. Because the loan was for the purpose of producing income practically all of the income is offset by her interest payments so her situation is not affected much. The son uses the 50k to buy his property, borrowing another 300k in his own name (trusts and things aside). His interest payments to his mum would be tax deductible because they were used for the purpose of producing income.
If this is the case the only slight downfall I can see would be the fact that the no-doc loan may have a higher interest rate, but since this is on a small portion of the total loan it may not affect the bottom line much.
Is my thinking here correct?
Thats one path. NODOC loans can be quite cheap these days.
I can’t really give advice without more info.
cheers,
Simon Macks
Residential and Commercial Finance Broker[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Forgetting about whether or not it is suitable, is it even possible to set up a facility in the name of the son (no christian punt intended) with the mothers home as security (rather than mother going guarantor), or does the facility have to be in the name of the title holder?
I don’t believe it is possible to have a loan secured by a third party’s property.
99% sure because there may be something out there that I haven’t heard of.
Simon Macks
Residential and Commercial Finance Broker[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I have done a similar loan once.
The son securred a loan against mum’s property, with the mum guarranteeing it. Both needed to seek independent legal advice from separate solicitors.
The rate was around 7.5% on a low doc basis. LVR probably max 60%.
Terryw
Discover Home Loans
North Sydney
[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
Was that recently Terry?
I have also done it about two years ago but it is no longer available – we also used something similar to allow a father and son to buy but keeping the father off title to preserve the son’s FHOG entitlement.
Cheers,
Simon Macks
Residential and Commercial Finance Broker[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
The Family Pledge product with St George may be an option to consider,
It would provide your mother with a limited guarantee and there is no requirement for guarantees to provide income documentation.This is not a low doc product and there is no LMI, Basically you would borrow 100% with 20% or 40% etc secured against your mothers property, Cheers.
Regards
Steven
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.
Simon
About 6 months ago. It was done using Solicitor funds. I agree it is very unusual.
Terryw
Discover Home Loans
North Sydney
[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 Carl-Vic
One very important consideration is whether your mother is on Centrelink benefits. If she is then accessing the equity may affect her entitlements.
My sister has offered to let us access the equity in her property to buy a commercial property. She receives parenting payment. She contacted Centrelink and was told that if she accesses the equity and lends it to us, the money then becomes an asset. I have looked at the legislation (I am a lawyer) and that is correct.
At the moment we are looking at having her guarantee our loan and having our bank use her home as security. I’m still not sure whether we can do that, but it will avoid the complication of having her PPOR (which is an exempt asset) become a non-exempt asset.
Sorry to bog you down in legalese but if it is an issue it should really be checked out.
Cheers
K
That’s a very important point actually, because she may actually be on some sort of pension. I will definately have to look into that.
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