Hi all,
Been a while since I've been on the forums here, but have a question if anyone could be so kind to help out.
At the moment, I part own a property in Tullamarine VIC, I bought it with my brother and step brother and we have recently subdivided it and in the process of building a new townhouse on the block. As part of our agreement, we have essentially split the property (soon to be two) three ways, so we each own 1/3 of the property, are responsible for 1/3 of the debts, and 1/3 of any profits. I assumed that since our names are all on the lease that this is how the bank would have looked at this deal, however this does not appear to be the case.
My brother in-law was looking at buying a new home for he and his family and went to get a pre-approval from the bank, and they advised him that he was liable for the entire debt on the property(ies) in Tullamarine, and as such, would impact his borrowing capacity. Obviously in reality this isn't the case and he's really on liable for 1/3, however the bank is not willing to take this into consideration.
The bank in question is the ANZ bank.
Wondering if anyone else out there has come across this at all, and whether there are any ways around this? Our mortgage broker has advised us that the banks have been tightening the reigns on lending and this new way of examining debt/borrowing capacity is a result. Would be interested if anyone else shares this view or whether we're being led astray.
Thanks in advance
Dave.
Yes it is very common. Buying with people can dramatically harm your serviceablity. With joint loans each person is responsible for the whole debt. If one doesn't pay the others are responsible. The bank can start legal proceedings and eventually take assets of any one or all of the three owners.
It gets worse, because banks will only take into account your share of the rent. So if you have a $600,000 loan with $600 pw rent, the bank will assume each person owes $600,000 but receives only $200 pw.
There is no way around this really, but you may be able to go to a new lender and just list your share of the debt and see if they ask questions.
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
Thanks Terry, unfortunately thats what i feared.
When you say to go to a new lender, are you saying that when we submit paperwork for another loan, we only list our part of the loan on the existing property in the paperwork? What is the fallout from this should they discover down the track the real situation?
Have you had success in doing this in the past.
Dave.
As Terry mentiones it is a common problem when purchasing as Joint Tenants or Tenants in Common.
I may have one solution and that is get your brother to shoot Terry and email or give him a call as he has a full suite of lenders to hand and it will cost your brother absolutely nothing to get the best advice.
Richard Taylor | Australia's leading private lender
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