This might be a little confusing but here goes.
My wife and I are looking to buy a PPOR but due to my current investment properties I can't borrow any money from the bank.
My mum has offered to finance a house for us. She is prepared to put up half the cash, and should be able to borrow the other half from a lender. I would be covering the costs of the loan repayments and would have an arrangement with my mum to repay the cash she has put in (plus interest)
Is it possible for my mum to have a home loan, but for only me and my wife to be on the title?
Obviously we would be happy to provide the bank with the house as security.Would lenders consider the repayments I make to mum as income, in regards to loan servicability?
Also, if mum applied for an investment loan would the banks count the potential rent as income? If the title isn't in her name I reckon this might be an issue.
Any thoughts would be appreciated.
Cheers.
If you are unable to borrow money now due to servicing issues how will you repay mums loan? Is there any way you can increase your income to be able to service the extra loan?
you might consider the following: a) rent to buy scenario with your mum owning the property however this may affect her eligibility for the pension/tax etc or b) you purchase the property in your names & your mum putting a caveat on it to secure her interests, she can Then get a LOC using her house as security & put a mortgage in place for what she lends to you.
Hi guys,
Thanks for the replies.
Our original plan was something like a rent to buy idea, but the only drawback with that is we would have to pay stamp duty (again) when the house gets transferred into our names, and my mum will be liable for capital gains.
We thought if we can buy the place and have it in our names from the outset, we could avoid having to pay stamp duty again.What are the banks rules on titles? Do they need the name on the title to be the same as who has the loan? What if the title has two names, one that is on the loan and one that isn't. Does that reduce borrowing capacity (since the bank can only have security over one owners share)
read my option b)
doggity wrote:What are the banks rules on titles? Do they need the name on the title to be the same as who has the loan? What if the title has two names, one that is on the loan and one that isn't. Does that reduce borrowing capacity (since the bank can only have security over one owners share)You cannot mortgage half a property.
The loan contract can be in different names than the title however everyone offerring security (on title) must be either a borrower or guarantor (otherwise no mortgage can be lodged).
Putting the loan in your mums name and property in your name would breach new NCCP and the Code of Banking Practice (might actually be UCCC) as the “borrower” must have a financial interest in the transaction. Therefore not an acceptable borrower if the title is going in your name and she has no legal interest in the purchase.
She could consider setting up a family trust so future profits and eventual profit from sale could be forwarded back to you in distribution however if she is trustee and therefore a guarantor I would say ethically and morally there should be something in it for her.
The trust option would be a lot easier and cheaper than options outlined above.
No1
(previously Banker) – I locked myself out…Generally banks will only lend to someone who is not on title if:
a) they are a spouse (married or DF); or
b) they are getting some benefit out of it, such as the controller of a unit trust (this is rare now).But they would require guarantees from the title holders as well so this wouldn't help serviceability much.
What you could do with this is to get your mum to buy as trustee for yourself or you and yourwife. This would be a bare trust where you and your wife are the ultimate beneficiaires and mum is the trustee. It needs to be properly documented up front and then you could avoid stamp duty later on (in most states) when your mum transfers title to you. Along the way you would be paying tax and claiming as if you were title holders.
The only problem is the loan. Most banks these days want to know if someone is acting as trustee for someone else. If they find out they may not lend, or they may insist on assessing the serviceability of the ultimate beneficial owners
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
Terryw wrote:What you could do with this is to get your mum to buy as trustee for yourself or you and yourwife. This would be a bare trust where you and your wife are the ultimate beneficiaires and mum is the trustee.
You could avoid bare trusts and asset protection problems, also 'rent to buy' contracts and yet still get your main residence exemption.
Talk to a solicitor about the impact of ID 2005/216.
Depending on your state, there may be stamp duty concessions as well.
Cheers,
Rob
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