Hi All,
I share a property that was purchased with my ex, & he is still living in it at the moment. I would like to purchase a new property & use 1/2 of the equity (which should be around $100K) in original home. I understand he must go guarantor for the new property to allow me to use the equity as security. Obviously we are looking to sell next year, but I want to buy soon & also give him opportunity to use equity also if he chooses. Then the profit from sale can be split when that happens.
My question is – is the new property loan a "whole new separate loan" & not a second mortgage on the first property????
Thanks in anticipation,
KristyHi Kristy
The only way it could be done is that if both names are on the Title of the existing property then both of you will need to go on the equity loan secured against the former PPOR. This would be a second or sub loan to any current loan on the property.
Subject to your income you could then take out a separate loan in your name only on the property you are looking to purchase.
Unfortunately the entire loan secured against the former PPOR will be taken as a liability when working out your serviceability.Course when the former home was sold the entire loan secured would need to be discharged.
Richard Taylor | Australia's leading private lender
Hi Richard,
Yep both names are on the original title & I have had the serviceability of a new loan looked at with no probs, taking into account the 100K still owing on total original loan.
So are you saying there is a sub loan only on the equity as such – and then the new loan is in my name only. This is obviously what I'd prefer.
What do you mean by "the entire loan secured would need to be discharged" ??? Is there any physical cost to "lose the guarantor" as such????
Thanks for your help….flying 1/2 blind here!
KristyThere are 2 ways to do it.
1. Both of you take out another loan on the existing property, such as a LOC, and then you borrow this and use as deposit for the new one. If you do this the new loan will be totally separate and if you default the only risk to your ex is losing the money from the LOC.
2. Use the existing property as security for the new one. This means cross collateralising the two. Ex will be a guarantor on your new loan because his security is being used to partially secure the new one. The risk is greater as if you default on the new property loan the bank could sell the new house or the old house or both.
If I was the ex I would be extremely reluctant to do either, but 1 would be preferable.
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 for the advice…..yes I probably would be reluctant if I was asked to do same thing too.
But speaking to the ex it might be easier than I thought….he is looking into buying the property himself, so buying me out so will gain the physical cash. So soon enough I may just have the cash to purchase new property & use an offset account to put spare cash into.
Cheers
Kristy27
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