Hi, I want to get started in property investment, the first stage of the plan is to restructure our current home mortgage and ownership to improve my lending capacity, however the costs in doing that are thousands of dollars in duty & fees, (at least thats what I hearing from the bank and conveyance)
The property is a typical partnership purchase in both names (husband & wife), as is the mortgage.
Just wondering if anyone knows a cost effective (legal) manner in which to move the ownership of our lifestyle property into my wifes name?
Hi John
Welcome aboard.
Not sure why it's costing thousands to restructure your finances to set you up to purchase your investments.
For a finance point of view – it shouldn't cost thousands to set up. Unless it's an external refinance to another lender and your outgoing lender has extremely high exit fees and/or break costs.
Where are these fees coming from? Are you looking to set up some sort of trust structure?
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Ok, let me restate my case with hopefully more clarity.
Based on Steve’s book I was considering putting our lifestyle property into a ‘family’ trust setup with a Co P/L trustee, with me as guarantor.
So I spoke with our lender (Suncorp) which advised that moving the property into that type of structure would be considered as a sale and purchase of the property which would trigger all relevant fees and stamp duty base on the value of the property.
Our estimate value $390K (conservatively)
Current Loan $330K
LVR – 84.6%
Suncorp said, I’ll need cash for the transfer duty ($12K), and will be hit mortgage insurance as LVR over 80%, mortgage stamp duty, plus standard loan fees.
I think under the trust setup Suncorp maybe viewing the property as an investment rather than a PPR.This property may become an investment property in the future, for now it is our PPR.
My accountant suggested (or my understanding of his suggestion) that I could simply transfer my half of the ownership to my wife through the Titles Office (via a conveyance agent), set up a trust ready for when I locate/purchase the investment property then upon acceptance of the contract source refinancing of the existing loan with me as guarantor on both the PPR and new investment property (probably with a new lender).
The quotes from the conveyancing agents are not high, however they have also said that the property will need to be valued and 50% Stamp duty of the transfer. I have tried working out the stamp duty using online calculators as well as using the transfer duty table on the Office of State Revenue and they all vary between $12k & $2.5K.
Maybe I’m not saying the right things to the bank and the conveyance agents?
I’m trying to work out the actual costs.
Up to now I been basing on the most conservative (highest) figures. Which means can’t start.Regards
JohnHi John
A lot of people set-up expensive structures that aren't always necessary.
Speak with a decent property related solicitor and accountant about this before you jump in – Terry W on this forum is a good option.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Thanks for that, I seek Terry.
Regards
JohnHi John,
Before I comment on your proposal may I ask the following:
1. Why do you want to do this?, and
2. Which State is the property located in at the moment?
3. What is the current loan on the property and what is the current value?
4. Would it be a good investment? i.e. would you want to buy it again now if you had your chance again.
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
Hi Terry,
1, Three Reasons (in short) – First and foremost ‘financial freedom’ , Secondly setting up my retirement fund. (I’m 43) , Thirdly it resinates in me higher than any employment or business I’ve had or got.
2. The property is in Queensland.
3. Current Value (approx.) $390K Current Loan $329K
4. Yes, for growth, No for positive cashflow. (currently I am renovating it)
Hi John,
Transferring to a trust will not assist your serviceability for more loans. This is because being guarantor for a loan is assessed in the same way as being a borrower.
Having the property in your own name would also assist your retirement.Transfer is not as simple as changing names on titles. You will need to seek legal advice – from a lawyer, not a settlement agent – as there are many issues involved such as stamp duty, land tax, asset protection, estate planning, bankruptcy, corporations act, conveyancing act matters and heaps of tax issues.
For example,
1. say you just changed the name on title without changing the loan amounts – this could mean you are disadvantaged in terms of tax deductibility.2. Say you transferred to a trust and lost control of the trust to another beneficiary = you lose the property
3. say you transferred it for under market value and later when bankrupt…
There is not much equity in it now, so transfer to a trust won’t assist in extracting equity in a tax effective manner. If you had paid the loan off nearly then it would be different – the trust could borrow to buy it from you at full market value and claim interest on the whole loan amount. Released funds could be used for a new main residence – indirectly allowing the claiming of interest on the main residence.
Basically to transfer now will mean stamp duty, conveyancing fees, legal advice, tax advice, new loans -discharge of mortgage, new mortgage, exit fees new loan fees etc.
You might be better to rent it out and rent yourself for up to 6 years and then reassess the trust thing down the track.
Any new property you buy you should consider a trust though.
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
Terry,
That’s great, thank you.
John
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