Bankruptcy and long settlement

[ashilleong]

Hi folks,
Let me start by saying we're going to get actual legal advice, but I just wanted to get some experienced views beforehand to see if we're barking up the wrong tree.

My husband had been declared bankrupt before we met and the first house we bought both the house and the loan went into my name. All good. We're looking at purchacing a second house (to become a PPOR with the first to become an investment and possibly sold at a later date).

We'd like to both be on the loan for this one as the bank won't lend with just my income. The problem is that his 7 years (until his record is cleared, he is no longer bankrupt but the bank won't lend to him until the 7 years is up) is up in October and we've found the house we want now. My father in law is willing to go on the loan but we would really prefer my husband be able to do this instead.

The owner wants to rent from us for at least 6 months (wich would be....October!) which makes me wonder if there might be some wiggle room if my understanding of settlement is right.

Could we exchange contracts with a very long settlement - essentially allowing the current owner to live rent free until my husband is cleared? If for any reason the bank still won't lend to him then, the father in law is still willing to go on the loan (as a back up plan).

What are the risks/problem/issues that I haven't thought of? If myself and my husband sign the contract of sale and it becomes myself and my FIL that end up with the loan will that be a problem? How do we put this to the seller to make it an attractive offer?

I'll keep you updated on what happens (I hate abandoned threads) but any advice/shared experiences would be very much appreciated.

 

[Aaron_C]

Given the potential finance issues maybe it's best if you signed the contract by yourself first and amend the names when you work out who's getting the finance with you. The vendor might or might not want a long settlement depending on what their own situation is.

 

[The Y-man]

We're looking at purchacing a second house (to become a PPOR with the first to become an investment and possibly sold at a later date).

.

Also consider the tax implications if you are drawing down any equity from the current PPOR to buy yournew PPOR....

The Y-man

 

[tubs]

You'd have to sign a contract with a long settlement, and leave it subject to finance right up until the last minute.

But a decent non-refundable deposit might help this.

What reason does the vendor have for wanting to sell if they want to rent it back. I'd explore these options to see if there's some way you can help them achieve their goal at the same time as achieving yours.

 

[Terry_w]

It could be dangerous to exchange contracts now without knowing you will be able to get finance in 6 months. What if you cannot?

It also wouldn't be easy to add the FIL to the loan unless he was on title.

If you do go ahead it will probably be best to buy in your name only as this reduces risk and you could always add your husband's name before settlement - possibly without stamp duty issues. If you sign both names now and cannot settle then both of you could get sued.

 

[ashilleong]

Ta guys, this has given us a lot to think about.

Tubs, she is an older lady who is selling because the maintainance is becoming a bit much for her and she wants to move closer to town, but she doesn't seem to be in any hurry as her son is staying with her for a couple of months.

Y-man - can you elaborate please?

What do you need to do to add someone to the contract?

 

[The Y-man]

Y-man - can you elaborate please?

If you draw down money against your current PPOR to fund your new place, then you can't claim that portion of interest as an expense when you turn it into an investment property.

The Y-man

 

[ashilleong]

Thanks Y Man.

We'll probably rethink buying right now and wait until October so we don't have to rely on anyone else. It means letting this place go, but hopefully something else will come along.