hey guys, I’m trying to enter the property market before end of year but haven’t been able to save a deposit. I have a secure full time job 100k+pa but no deposit. I’m keen to buy before the end of this year so am considering approaching my parents to see if they’d allow me to use the equity in an investment property they own (land only).
I’m wanting to purchase a house between 350k and 400k (investment). My parents own the land outright and I think it’s worth about 300k.
If my parents were to agree to this, how would it work and are they only liable for the amount of equity they allow me to use (i.e. 10 or 20% deposit), or are they actually liable for my entire loan if for some reason I couldn’t meet the repayments? I really just want to know how it would work and the worst case scenario as I don’t want to get my parents involved if it’s too risky for them.
My plan would be to refinance after 3 years and release their title.
If anyone has any experience in doing this or advise regarding this that would be great!
RobIf my parents were to agree to this, how would it work and are they only liable for the amount of equity they allow me to use (i.e. 10 or 20% deposit)
20% deposit + 5% for costs can be covered by the vacant land security.
If you select the right bank they will only be liable for the 25% portion.
or are they actually liable for my entire loan if for some reason I couldn’t meet the repayments? I really just want to know how it would work and the worst case scenario as I don’t want to get my parents involved if it’s too risky for them.
Depends on the bank you select but best to select a bank that offers a limited guarantee, that is only the 25% that parents put up in a separate loan split using land as security.My plan would be to refinance after 3 years and release their title.
Good plan if you can pay of thier 25% and / or property rises in value.
If anyone has any experience in doing this or advise regarding this that would be great!
Yes, done plenty of these.
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This reply was modified 8 years, 3 months ago by
Colin Rice. -
This reply was modified 8 years, 3 months ago by Colin Rice.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
Hi RobH
Yes this is certanly posibly as this is becoming more regular then many people think.
Talk to a Finance Broker about this
Thanks for the info!
Is it necessary in this situation to have a 20% deposit (equity from my parent’s land)? Or can it be done with 10%?
Thanks again!
Thanks for the info!
Is it necessary in this situation to have a 20% deposit (equity from my parent’s land)? Or can it be done with 10%?
Thanks again!20% is required as any less is in LMI territory and the LMI providers wont do these deals.
You could always get the full 20% and repay or offset the loan with the extra 10% you may already have. Swings and roundabouts really.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
Would the equity from my parents’ land effectively act as the deposit but allow me to finance 100% of the purchase price? I’m unsure as to how it works exactly.
Rob H
@rob H yes thats right and you can borrow 105% in order to cover all costs involved.
If you do have savings you now have the option of holding it back as a buffer in an offset account. This helps you pay less interest on the loan as it “offsets” the debt.
Many other benifits in addition to the one mentioned, if done right.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
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This reply was modified 8 years, 3 months ago by
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