Hi All,
Quick question for you all
I own 10% of a property with my mum.
The property is valued at $900,000 and the loan balance is $420,000
How much equity would I have available to me if I was only a 10% owner assuming that my mum would allow me to use as much as possible up until 80% LVR…Is this possible or can I only use 10% worth of equity?
I hope the above makes sense,
Thanking you all in advance
Shivasko,
It depends on whose name is on the loan documents. Are both your name your mum’s name on the documents or is the 10% you own a private arrangement with your mum?
If documented, then your equity = 900 – 420 = 480 x 10% = $48k but there may be other legal issues which you may need to check with your solicitor.
I think AW is getting slightly confused as you state you own 10% of the property with your mother so we would assume the property is held as Tenants in Common.
The loan however is a joint application and you both a jointly and severally liable for the entire debt.
Therefore subject to both parties agreeing to a new increased loan amount and satisfactory serviceability you would be able to access 80% of the current valuation less the existing debt.
What would happen is that you both would lend to you solely the amount raised and therefore the interest position jointly / income received is balanced and you can then personally claim the interest in your sole name (Probably would draw up a private loan agreement) .
Richard Taylor | Australia's leading private lender
I am a bit confused with the calculation. Can not match it up anyhow. But somehow calculation of awsydney makes sense. I can not figure out yet.
You can increase the loan up to 80% of the value of the property (without LMI) assuming you can service. But your mum must agree to this. How you use the funds is up to you and your mum,
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
Sorry but AW is wrong and Terry is correct.
Nothing to stop you borrowing as much as you like irrespective how the security is held but the loan must be in Joint names.
Richard Taylor | Australia's leading private lender
Hi Shivasko, You certainly can use all the available equity as Richard says. You could increase your existing loan, but it may be better to simply start another loan account with the same bank. It can be in both your names to simplify the application, and then you can invest it in an asset solely in your name and then claim all the interest as a deduction in your name (it's the purpose of the loan and ownership of the asset that counts, not the names on the loan). If you just took out the loan in your name, your Mum would have to go guarantor on it, and she'd have to go through all the rigmarole of getting written independent legal and financial advice satisfactory to the new legislation. I do a similar thing with my wife, ie put her name on all the loan docs to simplify the process.
That private loan agreement is a good idea. Your Mum must understand that she's effectively acting as a guarantor whether her name is on the new loan or not.Forgive me for being a little naive but the math for the 10% from AW isn't making sense to me.
If the value is 900 and to prevent paying LMI the total equity available would be 80% of 900 ie 720
less the outstanding debt of 420 = 300kShivasko's share is 10% of 300k = 30k
Please point me in the wrong direction if I have calculated this wrong.
Nicholas
Your share in the property and the amount of equity are 2 totally separate figures.
As any loan will need to be in Joint names the percentage split does not matter as you are both jointly and severally liable for the entire debt irrespective of the percentage split.
Richard Taylor | Australia's leading private lender
Thankyou all for your contributions, Yes the property is as Tenants in common. Richard, Terry and StumpCam seem to rarely give incorrect advice on this forum so I will take their word for it.
I wasn't aware I could access that much equity. Guess I'll have to get back into searching for property again.
Thanks again,
Shivasko
Hi Shivasko, thanks for the good rap. As the sticky thread says, always seek your own professional advice if you're unsure, and take what we say as a guide only.
What I can say however, is that my ppor is joint tenants with my wife, and I have a few IPs in my name. I have loans in my name only, using our ppor as security, for which my wife had to go guarantor. I also have loans in both our names with my IPs as security. The bank just needs security, but legislation says that if someone else shares that security, and they aren't on the loan, then they must get all that written advice stuff. Just speaking (writing) from experience.
Cheers,
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