My sister and I (and respective hubbys) have a jointly owned PPOR. We are all on the title as well as the loan which we have had split into two seperate accounts. We purchased this property together as it has two residences and will be able to be subdivided into four blocks in the next few years.
We have had considerable CG and now both couples are wanting to invest in other property. After seeing our bank we now realise that we are going to have difficulties securing money as individual couples as we will be viewed as owing the whole outstanding amount.
We are considering setting up a trust together and investing together but I want to also look at other possibilties.
One suggestion from our bank was to seperate the loan into two seperate loans and then each couple would have to go guarantor for the other. I’m not sure how this would help? Would it only help if we were to then go to another bank for our investment property/ies? Do you have to disclose your guarantor liabilities to other banks? How would our equity be determined by the other banks?
Any advice would be appreciated. Just want to look at all avenues so it doesn’t bite us in a few years time.
hi, can you just subdivide it now – in halvsies – it will solve a lot of your probs.
also – some banks are looking closely at the joint and severable thing – so financing may get easier.
cheers
brahms
Purveyor of Fine Finances
aka Mortgage Broker BrisbaneI believe the reasoning behind the bank person saying it may be wise to split the loan into joint names x 2 and taking guarantees of the 2 parties not present in each loan, rather than all 4 names in one loan is because under a 4 name loan structure if one applicant was to apply for another loan they would have the entire loan repaymnet of their existing facility included in their statement of position. Obviously that would limit their borrowing capacity.
As a guarantor this is not the same case as you do not own the debt and therefore only part of the debt/repayments would need to be included in the S.O.P. as the loans you are liable for is only say half of what it was under a 4 name structure.
It should be noted that different lenders have different thoughts on this policy, but I believe this is the main consensus. Also, just because you are a guarantor doesnt mean at the end of the day you are not ‘potentailly’ liable for the debt.Hope this helps
MattTechnically you could have to disclose the whole debt to the lender on each loan application. Even if the loan was split in to two, you each would be responsible for the whole loan if all the other 3 decided to stop paying.
Having a trust etc, would not help in this regard.
From an equity POV, the place is owned by all 4, so if you wanted to use this proeprty as additional security for a new loan, all 4 would have to consent. This would also reduce the equity left over for them to use.
It is a messy situation that many people find themselves in, including myself.
Terryw
Discover Home Loans
Parramatta
[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
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