Buying into family/friends existing mortgage

Discussion in 'The Buying/Selling Process' started by LSM87, 14th Jun, 2015.

  1. LSM87

    LSM87 Member

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    I haven't been able to dig up a lot of info on the particulars of this arrangement. Basically I'm looking at a situation where I'd take on % of the mortgage repayments and/or inject some funds into the mortgage in order to enter a tenants-in-common type arrangement for a % share in an already mortgaged property.

    I have lots of questions, like:
    - Do I still need to pay stamp duty on this 'purchase'
    - How does mortgage liability etc work, I'm guessing all parties are jointly and severely liable?
    - Is doing it "off the books" illegal?

    Any info, experiences, or direction to good resources on this would be much appreciated.

    Cheers
     
  2. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    The bank will never allow an entity to jump on or off the train without doing a a brand new application (which of course includes borrowing capacity).

    Also most banks with the exception of St George and AMP will take the full debt and only a portion of the income for future servicing/borrowing capacity. So you are hurting yourself somewhat by jumping on the title.

    Then there is a bunch of tax and legal implications which you will need to consider.
     
  3. jerrybee

    jerrybee Member

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    I'm on this same boat. I went halves with my mum but for a number of reasons we weren't able to put her on the loan / title. So Darryl (RPI) is going to set me up with a Bare Trust, which is basically just a simple contract that the banks don't even need to know about, so it doesn't make things more complicated with the banks in the future (this is what I wanted to avoid at all costs). I talked through all the considerations with him and am very happy with it.
     
  4. Hooray

    Hooray Member

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    Your forgetting the big question: how do I protect myself if my "family/friend" does a runner?
     
  5. jerrybee

    jerrybee Member

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    This has nothing to do with it. Even if he was on the title / loan, this would still be a risk.
     
  6. GreyGhost

    GreyGhost Member

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    Stamp duty is your biggest issue! No way around it.
     
  7. Terry_w

    Terry_w Member

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    Yes
    New loan needed. all parties jointly and severally liable
    no, but the current owner could be breaching their agreements with mortgagee and you will be unprotected without title.
     
  8. Terry_w

    Terry_w Member

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    You should read the bank's loan applications and mortgage agreement.
     
  9. Terry_w

    Terry_w Member

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    If he is not on title the legal owner could do many things which would effect the interest of the op.
    1. bankruptcy
    2. sale, mortgage, gift
    3. die
    4. divorce

    Then it would be a fight over priorities.
     
  10. jerrybee

    jerrybee Member

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    I guess my situation is a little bit different in that it's family so there is an enormous amount of trust here. This is by no means "as good" as having it all done properly but after talking to Darryl it was the best option without triggering stamp, remortgaging etc.
     
  11. Hooray

    Hooray Member

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    Of course nothing bad ever happens with family.
     
  12. jerrybee

    jerrybee Member

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    I never said that
     
  13. jerrybee

    jerrybee Member

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    I never said that. I'm just making the most of the situation I'm in. A Bare Trust is still 1000x better than a "hey trust me 50% of this belongs to you"
     
  14. GreyGhost

    GreyGhost Member

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    Mate how can you change ownership % without incurring stamp duty? You may get on the loan, regarding ownership of the asset there is no real way around this besides the property being held in a unit trust..
     
  15. jerrybee

    jerrybee Member

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    Hey, I'm no expert on this either. That's why I depend on the pros to guide me, such as Darryl from Certus Legal.

    As I said it's not 100% ideal, I'm just making the most of a bad situation. It's the most pragmatic approach so I took it.
     
  16. Terry_w

    Terry_w Member

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    If there is a bare trust then he is the beneficial owner of the property with the title being in someone elses name. No stamp duty on these transfers of title - of $50 nominal sum.

    But the problem here is that the trust is not declared to the lender. This is possibly a breach of the anti money laundering legislation, breach of the lender's mortgage and possible proof that a trust relationship does not exist.
     
  17. jerrybee

    jerrybee Member

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    Ok was not aware of all this. I'll discuss with Darryl and make sure I'm crossing all the t's and dotting all the i's when I do this (if I still decide to go ahead)!