Advice sought: home loan + settlement using attorney?

I'd like to seek some help please.

I am buying a property (owner occupied) that will be under my and my partner's names. She has no income and no assets at the moment.

I need to get a loan for about 20% of the purchase price (I got the rest in cash). I intend to apply for the loan under my own name

I had conflicting information regarding the loan application. I was first told that I can not apply the loan myself as the property will be in both our names. Then I was told it’s ok, as long as she can be a guarantor of some sort – but I was like: if she has no income and no assets, how can she be a guarantor? Why has she need to be in the loan application anyway?

Anyone can shed some lights?

Also, this may sound ridiculous, but IF I get this house at the upcoming auction, both my partner and I will be in overseas at the settlement date!!(planned already), I am abit unsure how can I actually settle it if I am not pyscially here to sign the dotted line. Someone suggested an attorney—i.e. your lawyer, good idea, no?

Thanks very much in advance!
 
Hi there
was thinking rather than your attorney - you give someone power of attorney to sign the contract documents for you - if the property is in NSW you will need to register the power of attorney.
It is quite usual where 2 parties are on title - and the loan is in one parties name to have the other guarantee the loan (even though they have no funds) - so the guaranteeing party can't turn around later and deny the terms of the loan. As a guarantor you have to be prepared to step in and take over the loan. The bank just wants to be sure both parties who have a legal interest in the property have given an interest to the bank that is enforceable if there were a default.
thanks
 
As your partner will be on the title on the property, the lender will want to know about her and will ask for a guarantee from her. The fact that she has not assets or liabilities doesn't really matter, so long as you can service the debt.

At a 20% LVR just about any lender will be willing to do this.
 
Thanks very much Raddles and Peter. Yep make much more sense now on the loan.

I am still thinking how this Power of Attorney would work -- I understand the concept, but how will the money flow? i.e. do i need to transfer all my funds to my solicitor's trust account first? then my PoA does the signing for me? Is it going to be safe?
 
hi there
whoever is going to be controlling money for your settlement (your power of attorney) is someone you have to trust - they will be providing bank cheques to your solicitor for settlement.
Do you have a family member or friend who you can trust - by the way - there are serious implications for someone who abuses a power of attorney - so it should be safe - provided you choose the right person.
thanks
 
I just spoke to someone from one of the financial institutions, and she insisted that my partner has to be listed as a borrower not a guarantor even though she's not servicing the loan??

This is confusing, because on the first page of their application form, you actually need to tick as either a Borrower or a Guarantor

Does anyone have an official line on this? (assuming all the banks are the same?)

EDIT:

Found this link here:From Dept of Fairtrading that kind of implies in my situation, my partner is a borrower not a guarantor.

still confused.
 
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she is more likely to be the guarantor

Raddles, would you please explain the reason? As quoted from my link above:
Becoming a guarantor to a loan means you are guaranteeing to replay the loan to the lender if the borrower fails to make repayments.
But since she will not be able to repay anything?:confused:

Thanks again:)
 
Hi there
just talking from personal experience with my sister in law whose husband was transferring an existing loan (where he was the borrower) to a new property where the parties were joint tenants. The Bank required my sister in law to be a guarantor given she was not a party to the initial loan.
As has been highlighted above - the ability to repay is not the issue - the relevant issue is the interest in the property - the bank wants all those parties who have a legal interest to be a party to the document. In practical terms they can require the guarantor to sell the property to repay the debt.
thanks
 
I was under the impression that under the consumer credit code a guarantor is to be able to service the loan on their own, and to have a person with no income would have to be a co-borrower.

This reason being that if the applicant is in default, the guarantor is required to make payments as they agreed to guarantee the loan.

It wouldn't make much sense for someone with no income to be a guarantor, but would make sense to be a co-borrower as they have an interest in the asset, therefore the lender would want to know about them, regardless of income and assets.
 
HI there
it would actually depend upon the terms of the documents involved - some guarantees contemplate money received, recovered or realised or available for receipt by the bank (which suggests the property can be sold to discharge the debt).
As this is going to be an owner/occupied property rather than an investment property there is going to need to be compliance with the credit code. But I have often seen wives (who do not necessarily earn an income) asked to guarantee their husband's loans - with the family home offered as security - to ensure the jointly held property can be recovered by the bank in the event of a default.
thanks
 
Hi MrFish,

My understanding of the CCC is the same as Raddles above.

Just interested in why you are so concerned about whether your partner is a borrower or a guarantor. Isn't the effect the same? i.e. If you stop paying the loan the house will be sold to pay the debt?

Cheers, Medine
 
Hi again
Just wondering if it may be worthwhile having your partner as a borrower with you. The bank is going to require something - and often being a guarantor is more of a rigmarole - there has to be independant legal advice given and usually certificates issued from a solicitor.
Solicitor's don't like having to give those certificates because it exposes them to liability if the person involved says they didn't understand what they were getting into. They prefer to deal with 2 borrowers who are signing mortgage documents.
thanks
 
Hi MrFish,
Just interested in why you are so concerned about whether your partner is a borrower or a guarantor. Cheers, Medine

Thanks Medine.

It's purely to minimize her involvement -- she will be gone overseas for a long time (from before auction date to after the settlement date), PLUS, since it's not her worry (ie. the house will get sold if I can not repay), so thought better leave her out of this.

All I want from her is her name on the title deed.

Save myself some trouble at the end of day too~
 
why would you bother involving her in the transaction... and does she know what your motives are.

pls add a bit of info.

thanks
RL
 
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