2 Partners - 2 Loans - 1 Property

[sebsez]

Hi there,

I'm just waiting for my broker to come back to me about the possibility of doing this but wanted to post it up here for discussion and see if anyone else has expirence in this... wondering if the following scenario is possible:

Have an existing property that was purchased together with a partner 5 years ago or so. The property is in our own names (i.e. not in a trust) Now because we have a single loan against the property in both our names, each of us is liable for the entire loan, therefore limiting our individual servicability for future loans.

Now question is, can we restructure this so that we effectively get one loan each for 50% of the property, therefore each partner only being liable for their own loan. I know this is possible in a trust structure situation where you have a trust each, and each takes out a loan for 50% of the property value and buys units in a "mother" trust, which in turn buys the property.

So would love to hear from anyone who has expirence with a similar situation or brokers out there that have done this before for clients.

Cheers

Seb.

 

[Rolf Latham]

Hiya

In short.............no.

The core issue is that with separate loans where each is responsible for their own is that if you default then the property cant be sold.

Sooo, u can do the 2 loans, but each must be cross guaranteed by the other.

ta
rolf

 

[sebsez]

Thanks Rolf,

I understand, however why is it you can do it within a trust structure situation? (1 trust each buying units in a master trust, which owns the property) What if you default in that situation? Does the bank just take your units in the master trust? I can't see that happening because what can the bank do with the units? They're going to want to take the whole house so they can sell it and get their money back...

See the above situation does not limit your individual servicability. I'm fine with the bank having to reposess the entire property if either partner defualts in their individual loans, I just don't want to be responsible for the other partner's loan and have to declare that as a liability when applying for further finance...

Cheers

Seb

 

[Mofra]

I understand, however why is it you can do it within a trust structure situation? (1 trust each buying units in a master trust, which owns the property) What if you default in that situation? Does the bank just take your units in the master trust? I can't see that happening because what can the bank do with the units? They're going to want to take the whole house so they can sell it and get their money back...

Seb,

The Borrower in these situations is not the Trust - it is the Trustee borrowing on behalf of the trust. May sound like semantics, but it does have a major effect, as if there are two people on the title, both will need to be connected to the loan as either a borrower or a guarantor regardless of the corporate structure you employ.

Also be aware that under a unit trust arrangement, many lenders will also request that every unit holder in that trust provides a guarantee to the loan, whether they (being personal or company) are involved as a trustee or not.

Cheers