Avoiding over securitization on property owned by family member

[bicko]

Ok,
bit of a curly one.
Is it possible to take out a loan for say $200,000 in my name against a family members property. When say the property is worth $280,000. Would this save the property from being lost if an absolute worst case scenario occured.

My understanding is that I would be liable for the 200,000 but the property would be safe.

Can someone tell me the implications involved, will add more detail if required


cheers

bicko

 

[Kristine..]

Bicko

How can you use someone else's property as security for a loan you are borrowing?

Kristine

 

[Rolf Latham]

Hi Bicko

A few lenders will allow the 3rd party security you are proposing with some strict condtions (im assuming that the person whose eqquity is being used doesnt benefot from it ).

Your liability if you had the loan in your name only would be limited to 220 k PLUS acrued interest and enforcement costs. The same liability would apply to the owner who would in almost all instances have to provide a security guarantee.

It looks like you have 220 k tucked away somewhere at the moment that you can use to "eliminate" the risk.

It would appear therefore that there is a risk to that security

ta

rolf

 

[rodimus]

is it a deposit bond you are talking about bicko?

a friend of mine used a deposit bond on the equity on his father's house to use as deposit.

 

[always_learning]

I totally agree, there are tousands of good mortgage borkers in this country and im sure that some of them are on this forum. Correct me if im wrong, but out of all these good mortgage brokers do any of them offer advice and help freely on every single loan product in Australia? or do they just do this with there own 2-40 panel of lenders and forget that all the others exist?

As a professional mortgage analyst, I do not wish to discuss business on the forum for all to see, as I respect the wright of the client with reguard to their personal and bisuness information.

However, as a new member to this site I do like this feed back and I have intended form day one to post fresh and new information on investment loan products as I receive it. So keep a look out for this information as new product enter the market all the time as banks get more and more aggressive, this will hopefully open new doors for investors like yourself, and you will start to appreciate the contributions I have to offer.

Thanks again

Paul McManus
Accreditated Mortgage Consultant

Just my opinion but there are a number of very competent mortgage brokers on this forum, and most seem to be very professional, but there is room for more on this forum, I havent noted that we have run out of integers for user ids. Forum member helping each first, professional business second!

I use one myself and have found their service to be excellent. They help first with their knowledge...and if your knowledge is too valuable to be offered in public on this forum...then it is pointless to post! Phone me on xxxx..xxxx.xxxx for a special deal is a worthless post on this forum!

As for posting offering new products...grey line stuff IMHO for this forum and on balance I would think not to do it! However occasionally a new product ie. 10 years fixed 7.xx% could be of general interest on the forum. I would think you would only do it when there is a clear way for someone to access the product without using you, ie Homeside is offering this, Westpac this. Something like "A new 10 year fixed for 7.1% is available phone me for details...has crossed the line".

 

[XBenX]

Originally Posted by InvLoanAnalyst

As a professional mortgage analyst, I do not wish to discuss business on the forum for all to see, as I respect the wright of the client with reguard to their personal and bisuness information.

Paul McManus
Accreditated Mortgage Consultant​

May I suggest if you wish to look "professional" that you at least use correct grammar?

Sorry for the rough reception but your sales pitch has been heard 10000 times before, the pitch tends to get greeted much like a phone call from a life insurance salesperson.

 

[Jas]

My understanding is that I would be liable for the 200,000 but the property would be safe.

bit confused by this sentence. if a loan uses a house as security, and you don't make paymetns, the bank forecloses.

The sell the house and give you any extra proceeds (minus their costs of course).

So, the loan is gone, but the house is too.

So no, the property isn't 'safe'.

hope this was your q. if not, clarify what you want and we'll give it another go.

Jas

 

[see_change]

Gee

Where did InvLoanAnalyst go

See Change

 

[InvLoanAnalyst]

Bicko,

Borrowing funds in your name against someone else’s property (i.e. your family members) is possible, however, most lenders tend to stay well away from this type of arrangement to avoid any bad publicity that may arise should they have to sell family members’s house to clear your debt.

Having said that, there are ways in which this can be done to reduce the risk of people losing their home. The things that a lender will take into consideration might be such things as :-

Ø The age of the person providing the security
Ø The income of the person providing the security
Ø What other assets the person providing the security may have
Ø The borrowers overall financial position and cash flow
Ø The amount of money being borrowed against the security

If you were looking at purchasing another property, I would assume that you would be looking at borrowing the full purchase price, plus costs, plus extra to complete any renovations etc. I would also assume that the property would not be providing you with any additional income whilst the improvements are being done, so holding costs such as rates, insurances and interest would also need to be covered, either by extra borrowings or existing income/cash flow.

The other thing to impact the possibility of borrowing these funds would be your intentions for the property once you have completed the renovations (i.e rent or sell). The important thing to understand is that if you borrow money using someone else’s home as security and are not able to meet your loan obligations, the lender will use its powers under its mortgage to sell the house to repay your debt. The impact of this can be reduced by giving the lender security over the property you buying as well; however the lender is not obligated to sell your property before they sell the other person’s property should they wish to clear the debt.

Regards
Paul McManus

 

[see_change]

Bicko,

...however the lender is not obligated to sell your property before they sell the other person’s property should they wish to clear the debt.

Regards
Paul McManus

I think this is an interesting / important point Paul has raised , which is something that I haven't seen mentioned on the forum ( that I recall ) . Interestingly it's only been raised with by one of the several solicitors who has witnessed the various mortgage / guarantees that we've signed over the last couple of years.....

The banks have discretion over which property they have rights over if it comes to getting money off you. They don't have to go for the property that is actually purchased by the funds they have provided. If you have provided a personal guarantee for a loan to one of your trusts and the trust defaults, technically there is nothing to stop the bank going for your PPOR First , ignoring the propery in the trust .

See Change

 

[Aceyducey]

If you have provided a personal guarantee for a loan to one of your trusts and the trust defaults, technically there is nothing to stop the bank going for your PPOR First , ignoring the propery in the trust .

That's why stressing about protecting your properties to the nth degree really is pointless.

If you default on your loans you may the price.

Spend the time & energy on ensuring you don't default instead of on legally tying everything in knots

Cheers,

Aceyducey

 

[see_change]

That's why stressing about protecting your properties to the nth degree really is pointless.

If you default on your loans you may the price.

Spend the time & energy on ensuring you don't default instead of on legally tying everything in knots

Cheers,

Aceyducey

While there are some things you can't protect from , you can still provide protection from assets in one trust against another trust, assuming you don't cross collateralise.

That's still worthwhile , and doesn't come at a major cost. We still have our PPOR in our own name simply because we've made a lot of CGT free profits from developing our PPOR's ( which we can channel into our trusts ) , and we plan on continuing to do that. We have our IP's seperated into different trusts which does provide a degree of protection.

See Change