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From: Mike .


no deposit loans?
From: JF
Date: 4/19/00
Time: 2:08:08 PM

Hi all.

I have been madly paying out a car loan for the past 8 months at a rate of $1000 per month and am almost in the clear. I want to buy a house now, trouble is because I have sunk evrything into paying out the car I have no deposit and only a few $$$ savings. I am thinking of buying the house off my folks - they are willing to do me a deal and sell at less than what they would in the open market.

I have heard somewhere that if the bank values the property higher than what I am looking at paying for it, that I should be able to borrow 100% and not require a deposit - however I have run this past a handful of banks already and they are all saying I must have a 5% to 10% deposit.

Does anyone know how I can buy this place without a deposit?? I dont even plan to live in it as I want to rent it out, and go rent somewhere else closer to the city and smaller for myself (dont know if not living in it makes any difference). I'd appreciate any advice you have to offer.

cheers, JF
 
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Les

Reply: 1
From: Mike .


Re: no deposit loans?
From: Les
Date: 4/20/00
Time: 12:38:40 AM

G'day JF,

Since you are looking at buying from your folks, they may wish to help you out by considering "leaving some money in the house" - i.e. offering you vendor finance for the difference. Effectively you are borrowing the deposit from your folks (as you are similarly borrowing 90% from a bank). With a little thought, and checking that what I'm suggesting is feasible, it could work out quite well. However, it really boils down to whether or not your folks are able to "do without" that 10% for the next few years.

Think it thru, and check it out, and I'm sure you will see that this could work out very beneficially. The Bank will lend to 90% of its valuation, or the purchase price whichever is lower, so an appropriate purchase price could work out well.

I know that others can find lenders that will lend to 90% valuation or purchase price - whichever is HIGHER - but I haven't yet learned how to do that, so can't help there.

But work it out between you and your folks - then check the proposal with an accountant and/or solicitor - it should all work out fine. And, depending on the agreed price, it could also include another 5% to assist you with the costs involved with the purchase.

Hope this helps - (hope it works out for you).

Les
 
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aben

Reply: 1.1
From: Mike .


Re: no deposit loans?
From: aben
Date: 4/20/00
Time: 1:59:58 AM

From reading your article I had a few ideas. Stop paying off the car loan today! Start your cash savings today! Once G.S.T. comes around (morons) you'll have a $7000 cash grant to fiddle with assuming it is your first home. Most lenders won't accept this grant as a deposit but it will certainly assist with your purchase costs and you may be able to use it to pay out your car loan (check this).

If you buy the house for investment you'll need 10% deposit, if you buy it for yourself you may only need 5% (stay for 1 night/week then rent it out). If you do save your deposit there will be a flurry of lenders to sign you up and you can choose a good loan package.

When in a similar situation, the banks would only lend to the purchase price but....they would re-value the property at any time that I thought there was equity. And they did not long after settlement!

So to throw this mess into one big wild idea...Provided that your parents house is near to freehold and they haven't rented it out (to messy otherwise-ie CGT), buy it off them for say $50,000 at 5% deposit ($2,500 you'll of saved by G.S.T. time) take your $7,000 grant for costs and the day/month after settlement get them around to re-value it! They will want at least 10% deposit then but it and any extended costs can come straight from the difference of the true market value and the sweet price you genuinely paid (parents will want the rest of their money !!!!!!). It is then ready to rent, you've gone to the city and the banks head is spinning faster than my dizzy head!!!!!

Refining wild ideas may present the answer your looking for....do the numbers. Good luck tell us how you went.

always excited Aben

PS Should i have included a disclaimer??!!
 
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Les

Reply: 1.1.1
From: Mike .


Re: no deposit loans?
From: Les
Date: 4/21/00
Time: 12:34:44 AM

G'day Aben,

Nothing like a wild idea or two to start the creative juices flowing....

Aben> "So to throw this mess into one big wild idea...Provided that your parents house is near to freehold and they haven't rented it out{to messy otherwise{CGT}},buy it off them for say $50,000 at 5% deposit{$2,500 you'll of saved by G.S.T. time}take your $7,000 grant for costs and the day/month after settlement get them around to re-value it!"

But (to JF as well) just keep in mind that part of the "refinement" process relating to wild ideas needs to include the various laws like (ATO) "Property transfers between related parties should be seen to be 'arms length transactions' " or words to that effect.

So be VERY wary of doing "sweet" deals that could likely turn very sour when the ATO sees a property worth (say) $250k being passed from parents to son for $50k. And then being almost immediately revalued for 5 times as much - sounds like an out-and-out case of Tax Evasion (Evasion is the NAUGHTY one - Avoidance or minimisation is legal).

e.g. Stamp Duty is paid on the "arm's length" valuation of a property, and one/fifth of the true value is hardly "arm's length". Be VERY careful - the ATO would NOT be amused ....

Keep those creative juices flowing - but also, keep questioning, learning, checking, and staying within the law - it's far more pleasurable ;^)

Regards, Les
 
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aben

Reply: 1.1.1.1
From: Mike .


Re: no deposit loans?
From: aben
Date: 4/22/00
Time: 12:49:37 AM

Hello Les,

To my knowledge, if your first home is to be used as a principle place of residence the transaction is stamp duty exempt. Additionally if the house has always been a principle place of residence (or at least legally claimed to be) there shouldn't be any C.G.T. to pay or claim.

Also from my dealings, as long as the paperwork is clean and criteria is met, loan consultants are only too happy to sign the deals up (even if they know the full story!).

I have never saved a cent, or deposit, or been to jail. Don't cross lines J.F., just warp 'em. Wise words Les.

Always listening, ABEN
 
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