Home Loan Advice (Two People on Title- One Person on Loan)

pacman21 on 02/08/2017 - 16:51
Last edited 02/08/2017 - 20:00 by 1 other user

Hi guys,

I've recently purchased a property in Sydney and I'm looking for a good loan provider to meet my circumstances:

• Both myself and my mother will be on the title of the property
• The property value was $850k but I would like to borrow $450k
• I would like the loan to be solely under my name and I will handle all payments/income between the family behind the scenes
• I'm after investor rates at the moment (place is currently tenanted) but I will likely be looking to change to owner occupied in ~6 months

I've tried with the suggested loan providers here (Ubank and loans.com.au) but they both have funny rules about providing loans to individuals whilst there are multiple people on the title and loans.com.au just gets more and more complicated the more I speak with their agents.

After some advice on who would be best suited to my needs and have the best rates?

Thanks,

Allen

• 

  geek001 on 02/08/2017 - 17:05

  +5

  Do you know any mortgage brokers? I think there is a few on Ozb. I would be surprised if none of them has contacted you yet. :)

  • 

    naritas on 02/08/2017 - 19:48

    +1

    I would be surprised if none of them has contacted you yet. :)

    hahaha we're actually not allowed to due to store rep policy. But if the OP wants to send us a PM it'd be our pleasure to assist ;)

    In the meanwhile, we'll have a shot at providing some general thoughts (i.e. not credit advice/usual disclaimers apply) on the OP's scenario:

    The property value was $850k but I would like to borrow $450k
    I would like the loan to be solely under my name and I will handle all payments/income between the family behind the scenes

    Generally speaking, lenders will not approve an application for a mortgage where all people on the collateral property's title are not proposed to be on the mortgage.

    Why? It comes down to the legal aspects of registering and enforcing a mortgage when not all parties have agreed to it. A workaround may be to have your mother guarantee your loan application i.e. you are the sole borrower but she is guaranteeing the mortgage (providing collateral support with her proportion of the TIC owned collateral property).

    You could avoid any reference to your mother being made, however, if you were offering collateral that only had your name on title vis a vis using equity from another property in your portfolio if this is possible.

    After some advice on who would be best suited to my needs

    In short, the scenario you describe will typically be too complicated for a fairly low level customer service person. If you were planning on going direct to any institution, what you would need is a mid-level (or greater) credit assessor or senior bank manager with an appropriately high delegative authority that you could speak directly with. You must ensure that you provide a written set of objectives that clearly spells out your requirements upfront and that they, similarly, provide you answers and commitments in writing. Alternatively, as others have pointed out, this kind of scenario is bread and butter work for a mortgage broker.

    and have the best rates?

    It would be hard to give you an accurate answer as to which lender would provide you the most competitive offer without a complete picture of your credit profile and that of your mother (as she will likely need to be a guarantor in the proposed scenario). From an extremely general standpoint, most ADIs (licenced banks) of moderate (or greater) size would consider approving scenarios such as this. Usually very small lenders or lenders with extremely sharp single product pricing are not entirely keen on scenarios with guarantors and complications that extend beyond entirely straightforward purchases or refinances.

    If you were in a hurry and you let your broker know this upfront, an appropriately skilled mortgage broker should be able to quote you very quickly (perhaps immediately after reviewing your complete credit profile and performing a needs analysis, but usually in not more than a day or two if they feel it wise to get written undertakings from the ADIs they had in mind for you before quoting).

    Hope this helps

    • 

      pacman21 on 02/08/2017 - 20:39

      +2

      .. Your ideas are intriguing to me and I wish to subscribe to your newsletter.

• 

  djkelly69 on 02/08/2017 - 17:12

  Are you purchasing at joint tenants or tenants in common?

  • 

    pacman21 on 02/08/2017 - 19:21

    Tenants in common

    • 

      djkelly69 on 02/08/2017 - 19:40

      What shares?

      • 

        pacman21 on 02/08/2017 - 20:35

        50/50

• 

  [Deactivated] on 02/08/2017 - 17:58

  What's the problem with having your mother on the mortgage? After all, the bank will take security over the whole property, not just your half the property.

  Is the problem that your mother doesn't have an income or doesn't want to liable if you default?

  Edit: Thinking about it some more, consider this: Husband and Wife jointly own a house are getting divorced. It gets messy. Husband mortgages the house, takes the cash and blows it all on hookers and coke (all without the wife knowing). Wife and Kids are homeless come divorce settlement time.

  Google "Matthew Perrin" if you think I'm exaggerating.

  There's probably a good reason why no bank would enter into this sort of arrangement.

  • 

    pacman21 on 02/08/2017 - 19:23

    More of an ownership and responsibility thing than anything. She is providing the initial 50% and is happy to do so but doesn't want to be involved in the loan. She barely has an income as parents are both close to retirement but their assets far exceed the loan amount.

• 

  chumlee on 02/08/2017 - 18:21

  You may need to borrow less if loan is just in you name. You want to borrow more than 50% and you only own 50%. If property value falls bank want to protect themselves

• 

  Stewardo on 02/08/2017 - 19:16

  Consider the tax implications if your mother is part owner with no income.

  • 

    pacman21 on 02/08/2017 - 19:24

    Could you expand on this?

• 

  Stewardo on 02/08/2017 - 19:28

  You should consult a professional regarding this like an accountant.
  if it's 50/50 ownership the deductions go to 50/50, if your mother has no income other than the rent she may not benefit from deductions.

  • 

    [Deactivated] on 02/08/2017 - 19:55

    -1

    The probably will probably be positively gear, since the LVR is only 50%. Not much to consider with this arrangement.

    If they want it tax optimal, they would buy 99% share of the property in the @pacman21's name and try to borrow 80-90% and negatively gear it.

    • 

      Stewardo on 02/08/2017 - 21:02

      -1

      Explain how tax deductions and taxable income don't need to be considered if property is positively geared.

      • 

        [Deactivated] on 02/08/2017 - 21:57

        -1

        1. You said deductions. There's no deduction with positively geared property.

        2. You can consider the income all you want, but the OPs mother has already decided that she wants to have an ownership interest in the property. Any tax optimization would involve reducing her ownership interest, which she probably doesn't want to do (see my comment above about the tax optimal arrangement)

        3. The OP's mother should probably think about estate planning too, but if she wants an ownership interest in the property, the estate planning outcomes will be sub optimal too.

      • 

        Stewardo on 02/08/2017 - 22:39

        -1

        No deductions for positively geared property?

      • 

        [Deactivated] on 02/08/2017 - 23:50

        -1

        @Stewardo:

        Yup - positively geared by definition, the income is greater than expenses, so the residual income is added to your assesable income.

      • 

        Stewardo on 02/08/2017 - 23:58

        -1

        @sp00ker:
        Expenses are deductions