Hi guys/girls, I'm wondering if anyone here has taken out a mortgage for a home with both partners (husband + wife for eg.) paying it down and living in the house, but with only one of the pair listed on the mortgage and property title?
Does this effectively reduce the borrowing power, or can both partners still apply, with only one actually taking it out?
But can they assess the borrowing potential of someone who is not on the title and mortgage? Wouldn't this put whoever IS listed on the title and mortgage in an 'un-sustainable' position..?
Edit, just re-read your comment and I think we're saying the same thing..
Naturally I'll speak with some lenders about this, but OZB is great source of impartial experience/advice, so cheers for replying!
To get the borrowing power of you both, you will both need to apply and both be listed on the mortgage.
But can they assess the borrowing potential of someone who is not on the title and mortgage?
Lenders need borrowers who they can legally chase down for the money. No point in accessing someone who they won't have power over.
Is it this clear cut? Partners can be held liable for their significant other's tax debt (I know this is different), and I do believe there is a prima facie assumption that other debts incurred during a defacto relationship/marriage are incurred mutually. So I would say the lender does potentially have recourse against a partner to the contracting party. Not a lawyer, though.
Pretty much as black and white as the law can be, as far as I'm aware. Banks aren't party to the marriage, so they're unable to rely on family law to claim amounts against the other party.
Tax debts are…. a special case. Both because the ATO as some fairly draconian powers, and also because it generally only applies if the parties have filed jointly (and so have been assessed and received tax refunds jointly).
Banks have rights against borrowers pursuant to loan contracts.
They have rights against mortgagors under mortgages.
They (may) have rights against guarantors under guarantees.
They have no rights against non-party spouses under anything (as a general rule, absent fraud or other special conduct).
And they are unlikely to want to rely on any fancy causes of action when they can normally just rely on their contractual rights.
Does this effectively reduce the borrowing power
Yes
You have to be listed on the mortgage to be factored in to the assessment of ability to repay i.e. borrowing power.
Not sure what you're even trying to do? Why do you only want one of you on the mortgage?
Only 2 reasons that come to mind.. Double dipping down the track on subsidies or if one is a director of a company you shift all of their assets to the other.
A consideration, and one that no-one really wants, is what could happen in the case of future separation / divorce of the couple.
If only one person is on the title (and mortgage), that person alone is still responsible for paying the mortgage until the distribution of assets is resolved (regardless of who is living in the property in the meantime).
Similarly, couples should consider how the property ownership should be handled if the case of the property owner's death.
Good point. As whoever holds the mortgage and title at the time of purchase could have half the property taken in a divorce settlement, but be left carrying the bag for the mortgage. There would no doubt be some court time to follow a case like this.. As usual, the only winners would be the lawyers!
As whoever holds the mortgage and title at the time of purchase could have half the property taken in a divorce settlement, but be left carrying the bag for the mortgage.
Possible as the end result, but not in terms of how it'd happen legally, because a mortgage is a secured debt against the whole of the property, a divorce settlement is between the parties to the marriage, but because the bank isn't a party to that marriage, their security against the property is not affected.
Plus - the parties only really own the equity in the property, not the whole value, if there's a mortgage.
Yes.
And if only one party is on the property title, that person's asset (being the equity) would be assessed in the marriage dissolution along with any evidence that the other party contributed to the asset ownership or growth.
Both on the loan and 1 in the title is doable.
Other applicant will need to get their own legal advice.
Name checks out
Both on the loan and 1 in the title is doable.
Yep, I thought this would be a more doable scenario.
The title on our place is my name only, but my spouse and I both had a joint mortgage on it.
I don't think bank would love that idea. Unless you have avidence if it's doable.
I did one last week. All the evidence I need.
I’m doing this to protect our house from my profession, bank only concerned that the house is security (irrespective of who owns it) and we both sign off loan contract.
I had this done previously.
I had just started a new job and the bank would not take into consideration my income for the purposes of the loan assessment.
But they were more than happy to put me down as a party responsible for repayments.
Thankfully the other half's income was enough for eligibility.
But haven't you effectively both applied (and appeared on the mortgage/title), just with your income assessed as zero for the purpose of approving the loan?
It appears that way…
I've been in that situation with an investment property. My partner works and has an income but for tax reasons, she wasn't on the mortgage or title. The lender then considered her to be my dependant which further reduced my borrowing capacity.
Ouch.. Sadly we don't earn enough to allow that to be the case and get any sort of mortgage!
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Hi. When it comes to husband and wife, it is very common to have just one on the title and both on the loan. Often for asset protection if one party is say a partner of a law firm.
Yes and No depending on how you clarified why the title is not on both names / why you want both names on mortgage.
thought recently there was a new code of banking practise, not sure if it changes anything about borrowing structure.
Also you may be able to quote income from the other party as rent if you are not putting them on the title/loan.
That would help the numbers if they have have an income and are not dependent
Not saying this is impossible, but this would require a chat with a mortgage broker because there are some significant differences between owner-occupier loans and investment loans, and usually only the latter will let you factor in rental income.
I was wondering this as well.. Though I reckon its probably stretching the boundaries of ethical lending practices and lenders are likely not willing to do it. Plus, if I were receiving this "rental income", shouldn't I also be paying income tax on that..?
Be careful in going down this path as this can trigger tax liabilities and Capital Gains Tax. You will need to declare your rent income on your tax return (which will allow you to deduct some expenses which are based on the % of property rented out). Also since your PPoR is now producing income it may mean you are liable for CGT.
https://www.ato.gov.au/General/Property/Your-home/Renting-ou…
Get your broker to run some scenario's for you based on how much you want to borrow. This will also allow you to workout the way forward and whether you need your wife's income in the home loan serviceability.
The bank only cares about who's on the title and the mortgage. If you're not on those, the fact you "applied" or are helping pay it down is irrelevant because the bank still has no recourse against the non-owner/borrower.