how to record mortgage to me on my son’s home purchase which may become rental property later

For ease of use, its probably best to write the loan up as an informal private family loan with formal documentation (prepared by a lawyer). I know you want to hand him a little bit of money and make him responsible for it as well. But too many undeclared loan arrangements cause family issues .. whether straight away .. or later on. The reason I state the loan should be informal is that a registered loan on title outside of the mortgage may affect any refinancing arrangements he wants to take on in later years.

At the sale of property, if you have any doubt on who will be owning the property add a AND/OR NOMINEE clause at the end of the name on signing. Its something you can do if the person purchasing is overseas or absent from being able to purchase direct.

Finally, If I was purchasing for my kid, I'd allocate enough into the initial loan to get him the property (say 20% or a third) and stake an amount for his welfare outside that. Otherwise, should job go wrong or family/social issues happen, he's up a proverbial creek without a paddle. Much wiser to provide a bare minimum for him, and a buffer for any future issues. Heres hoping he never needs it, but its much better than not having it.

Formalise any loan arrangement with a lawyer. There are three reasons, you get the solicitor with a copy of the loan documentation, you get a piece of paper stating the precise terms and amounts, and it will make him realise that its not a gift .. its a formal loan on his behalf. A reasonable solicitor should be able to write something up under 600 bucks. Its worth it for the peace of mind.

A reminder that as a PPOR he has six years absentee before he must move back to claim it as his prime residence.

Priority.

Having an informal loan agreement could mean missing out if things go wrong and other creditors have competing claims and establish greater priority. Having a registered mortgage will give the greatest priority.

You can have the mortgage registered on title, similar to the registered bank mortgage. A solicitor will draw this up for you, its a pretty standard piece of documentation.

The important things to lay out in the documentation is the terms of the loan (what he will be paying), the conditions of the loan (how the loan was offered from the start), and of course .. extraordinary circumstance (what happens if one of you dies or a divorce, or if there is a foreclosure).

My main reason for treating it as an informal (not registered on title) is more to do with the fact that if its anything substantial, the banks will deduct it from any further borrowing capablity that he has. If thats minor to you, then dont worry about it. Write it up as a secondary mortgage on title.

If you want to retain the capital investment in his home regardless of the initial amount, write the loan up as a percentile of the actual value of the house. That way .. regardless of the change in currency, you always will have the same percentage of the house as part of the mortgage. Sure, he'll be paying interest on the fixed amount, but if any sale is required you would be entitled to remuneration from the house at the percentage level. Of course for that you write in once the loan is paid back .. its his anyway.

I have something similar with my brother. We bought a house together just over a year ago now. Individually it would have been difficult for us to purchase, but together it should be fairly comfortable. In an effort to save on interest and whatnot, we are pretty much just both putting in as much as we can to pay it down as quickly as possible. As I do earn extra, I will be contributing a significant amount more. However he did have a larger deposit.

At the end of the day, every payment has been tracked, as well as the other household payments such as bills and groceries. So when the loan is paid off, it is the intent that whatever the difference is, he will owe me. Being family, he will owe me just about interest free. And then we will both own half of the house, although there is potential that a different scenario might occur, he might buy out my half or vice versa.

Anyway, I think the important thing is to just track every payment you make, just using a fairly simple spreadsheet to show how much you have contributed. Ensure both people see if regularly to mitigate any chance of disagreements at the end.

i haven't read every post so not sure if anyone has mentioned this..

the money you lend your son will most likely be factored into his serviceability of his bank loan (saw this happy with NAB late last year). so if you are lending him money because he is unable to borrow the full amount, he may run into problems, unless your money is a gift (stat dec may be required).. having the money as a gift, you could still have a private agreement to claw back the money if/when the house is sold.  A solicitor will tell you what needs to be done. As for putting your name on the title, I should suggest you thinking about what effects this may have in the future when the property is sold.

wonderful and informative post. thank you all for contributing and enriching the topic in concern.