All,
I have been trying to work the math on helping my brother leverage his first home owner grant "while it is still hot" so to speak.The reason I have jumped onto the forum is I am unsure about the best way to approach the entire situation.
The Full senario is as follows:
I have recently finished renovating my first apartment in Sydney, and have placed it on the market to sell at (or before) aution on the 12/9. From my property I will have aprox $100,000 in equity which i am keen to reinvest.
My brother works part time in between uni, and only earns around $250 – $300 net a week.
The property we are looking at is up for auction in the low $300's, however the auction is the week before on the 29/8. Now I am confidant that it will go to auction given what the real estate agent has indicated with strong insterest that will benefit an auction so there may be a slim chance that i would get an early offer and move on the property that way.
The third party that could make a difference is my parents, whom are willing to provide the 20% deposit in cash in the interim so long as I get the money back to them once my place exchanges.
The investment I am looking at requires between $30k to $50k in renovations, and once completed we would be lived in for a minimum of 6 months with me and my brother (to satsify the FHOGS) and then turn it into an investment with +CF
So here are the questions:
1. Can my brother qualify for a loan of aprox $260,00 only working part time? I am happy to help out in any capacity ie. guarantor
2. More of a statement, but i obviously don't want to look at stratigies that would jeopordise the FHOGS
3. if it is feasible what would be the best loan structure, it there anything I should be looking for product or feature wise?
4. is there enough time to get loan approval processed?
I know there is some pretty knowledgable finance guys on the forum, and I am more than happy to work with a knowledgeable morgage broker, my personal contact details are [email protected]
Thanks for the help guys.
Carl
His income is about $15,000 pa. That means rough borrowing cap would only be approx $90,000. Can't accept gurantors from non-spouses (parents maybe ok).
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
Terry has beaten me to it in doing the numbers.
60% would be an available option but perhaps not so palatable for you both in tying up equity.
Richard Taylor | Australia's leading private lender
I'm a bit confused, are you saying you would buy the property together in joint names? I was under the impression the FHOG becomes ineligible if there is a name on the title who has previously owned property. So I'm guessing you're talking about putting it 100% in his name, but you are driving the "investment" and will share in profits.
Also, for your brother to get a loan in the first place they seem to be very strict to first homebuyers now on showing true savings for the deposit and monetary gifts from parents/others don't apply. He must have a history of regular savings over some period of time.
I'm no expert and fairly new to this as well, but in terms of loans from what I understand if its going to be an IP property you are aiming to keep for 5 years or more (obviously IP once you satisfy FHOG minimum occupancy requirements) then an IO loan is better with a fixed interest term for 5 years, But if you plan to reside in it as PPoR then P/I loan is better and pay off as much as possible. fixed interest IO repayments remain you can budget for the exact repayments monthly but they often attract high fees if you then change the loan, refinance, or sell/payout early.
Esentially the idea was to where possible help him make the most of the current FHOGS with the boost. Yes we would be investing in it together, but as you point out I cannot be a joint owner because then he loses the FHOGS for good, consider me more of an off the books silent partner.
At the end of the day the FHOGS would contribute around $25k to the project, which would help the viability of the project dramatically. The concept is that we can use the FHOGS to redeveolp the property faster, wheather (after 6 months of occupancy) we sell the property or hold there will be a substantial increase of equity, of which my brother could use his cut towards another property in the future.
Failing this I will approach the investment myself and make the best of it, but I would like to help out my brother if I can.
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