Hi Guys,
I have been trolling around this forum for a while now and have uncovered some great nuggets of wisdom. Just hoping if any of you can share some insight into my situation:Background:
1. I currently board with parents in their PPOR (we have lived in it for about 8 years now)
2. Parents still owe 310k mortgage on the PPOR (rough market value of 700k)
3. Parents owe another 320k mortgage on an IP
4. Mum owns a piece of land in an island in Queensland (value 40k)
5. Long story short parents made a lot of unwise financial decisions and are struggling to meet repayments. I have bailed them out several times in the past at a huge cost.
6. I plan to get married (another unwise decision some of my friends tease!) late this year or early next
7. My fiancé and I would be classified as FHO
8. I have a pre-approved loan that can easily cover the outstanding amount on the PPORTarget:
1. Parents want to transfer ownership of the PPOR (and remaining mortgage obligation) to me (and then later my wifey) and continue living with us. Some may just say why don’t I “simply take over mortgage repayments and leave the deed as-is?”:
a. In my opinion it provides more accountability into how the family’s finances are handled (poorly in the past).
b. Mum is doing a new (albeit risky) venture and I don’t want the risk of her getting sued and losing the family home in the process.
c. Both parties see it as win-win as it reduces their mortgage stress (been taking a huge toll), gives their son a head start in life (and repay the bailouts) and still having a place to live in. Their ultimate goal was for me to inherit the house anyways.
d. Would put stress on my future marriage as wife would think that I’m always bailing out parents and paying the mortgage on a house that isn’t ours.
2. We obviously want to adopt an approach to minimise costs to achieve this.Assumptions:
1. As a FHO we would be ineligible for stamp duty concessions because the true value of the property > 600k
2. Even if parents “gift” the property, we will still be liable for stamp duty on the true value of the property
3. As parents are disposing of the property they would incur some level of GCT
4. There will be additional costs/complexities involved with re-financing the remaining PPOR mortgage to meQuestion:
1. Are the assumptions correct? Are there any others I may have missed out on?
2. What exactly would be the complexities with refinancing?
3. Are there alternative routes I can take to achieve this? Or to address the driver of reducing liability to me and my wife.
4. Any other thoughts?I understand that whatever responses posted here is not financial advice but rather form discussion points when I consult a solicitor/accountant.
Wow sorry that is my life story in (more than) a nutshell! Any thoughts would be greatly appreciated
Thanks,
Philhi Phil
A few more things to consider:
– possibly no CGT as the place is the parents PPOR.
– You can't just refinance their loan into your name. You will have to apply for the loan separately and qualify. You can have the same amount though and it will be a family transfer – banks will understand.
– You need to consider the bankruptcy act. eg any transfer undertaken within the last 5 years can be undone if certain conditions are met – such as under market value etc. eg. if value is $700,000 and you only pay $310,000 = $390,000 under value.Also under the Bankrucpty Act transactions entered into with the aim to defeat creditors can be undone with no time time.
– Centrelink issues. Your parents may not qualify for the pension if they give away such a large amount.
– Family Law issues. Keeping it in your parents name may be safer for you in this area.
I think you should seek out a lawyer and run thru it all. There are ways to protect the property while it is in their name and this will be much cheaper for you than paying stamp duty. Caveats, options, long leases, loans, mortgages etc.
You could take over payments for example and have the money as a loan to them. This could be secured by a second mortgage so you take priority over other creditors if they go down.
Also look at them setting up a testamentary trust in their will. Huge asset protection advantages and tax advantages down the track. Also make sure they do their wills – and u too!
You could also buy somewhere else, maybe under $500,000 so you can ge the grant and then stamp duty savings. Move into it and then out again back home and have it CGT exempt. it would be a shame to waste the stamp duty exemption
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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