Common Tenants Purchase!

Hi Investors,

I have been reading all your advice on here the last couple of years, big fan of The Y Man! And last Monday i made the leap and bought my first property :)

Heres my situation...

I am 22yo and had saved up a large deposit, although because i am still studying and not working full time i have been unable to get approval for a loan. The way i have worked around this is by getting a joint loan with my Mum, but i am the only one contributing financially because i still want this to be my baby :)

The bank said that my mum must have minimum 20% on the title to use her income to acquire the loan. So my property will be 80 my name, 20 my mums. The arrangement i have with mum is she will not pay a cent, and has just done this so i can get in the market now. I will rent it out for a few years and when i can afford to do so, i'll move into it and get her off the loan and title.

Has anybody has a similar experience? I just want to know about the process of getting the 20% in my name down the track. I heard today that i will have to pay stamp duty on 20% of the value of the unit aswell as transfer fees :(

Thanks guys
 
And your Mother will have to pay tax on the capital gain.

This is a very bad way of making a purchase for yourself

Before you sign up for this, realise that implicating your Mother in the deal when she has nothing to gain, makes her a Borrower of Convenience for you, and the deal could be significantly inconvenient for her

Life has a habit of changing when we least expect it.

We assisted our children to buy property at very young ages, but we made sure that assisting them did not undermine us and did not create situations of later expense or of tax liability

There is a better way than the way you describe

Seek professional advice or at the very least, talk to a Broker and not just the branch of your local bank

Cheers
Kristine
 
Hi Kristine,

Thanks for the reply :)

I thought the benefits of getting in 3 or so years earlier then i otherwise would be, would out weigh the CGT and SD. Do you disagree?

It won't inconvienece her for long as within a few years with my full time income i should be able to release her from the loan.

Thanks and encouraging more replies :)
 
I think what Kristine is saying is that your Mum might be up for a CGT bill when you do transfer her ownership back to you. Also don't forget in the meantime you can only claim 80% of the rental income and 80% of all the expenses. Your Mum will be required to claim 20% on her return.
 
I am 22yo and had saved up a large deposit, although because i am still studying and not working full time i have been unable to get approval for a loan. The way i have worked around this is by getting a joint loan with my Mum, but i am the only one contributing financially because i still want this to be my baby :)

well done on the 20 %.............is the property a "cheapy"


ta
rolf
 
u should be able to get this 99%/1%

will make the transfer costs, capital gains and stamp duty insignificant

i would suggest avoiding cba for this transaction
 
Wouldn't it be better if your mother lent you her portion and it becomes a debt you owe her. Tell the bank it is a "gift" so they don't take into account the fact that you will be paying her back.

If you are going to be paying all the costs, you just pay the bank and your mother, as planned.

Or do what we did for our 22 year old son. He had no savings due to paying off a car loan to our family trust much quicker than necessary, instead of saving.

Our broker organised that we guaranteed one-fifth of his loan ($290K loan) and that saved him paying LMI of about $7K. When his unit rises in value enough, we will have the guarantee released. Meanwhile, we contribute nothing financially. He is paying his way completely.

He was offered loans from Westpac and St George, and it did help that there were tenants in the unit and the banks both took into account the rent coming in, even though he planned on moving in as soon as the tenants left (three weeks after settlement).

A good broker is a HUGE asset. Don't go direct to any bank, in my opinion.
 
well done on the 20 %.............is the property a "cheapy"


ta
rolf

What do you mean rolf? The 20% would be on mums name, i have the 80%.
Property is 500k

u should be able to get this 99%/1%

will make the transfer costs, capital gains and stamp duty insignificant

i would suggest avoiding cba for this transaction

This is what i was hoping to do, but the bank (westpac) would not give me the borrowing power using mums income unless she had min 20% on loan.

Wouldn't it be better if your mother lent you her portion and it becomes a debt you owe her. Tell the bank it is a "gift" so they don't take into account the fact that you will be paying her back.

If you are going to be paying all the costs, you just pay the bank and your mother, as planned.

Or do what we did for our 22 year old son. He had no savings due to paying off a car loan to our family trust much quicker than necessary, instead of saving.

Our broker organised that we guaranteed one-fifth of his loan ($290K loan) and that saved him paying LMI of about $7K. When his unit rises in value enough, we will have the guarantee released. Meanwhile, we contribute nothing financially. He is paying his way completely.

He was offered loans from Westpac and St George, and it did help that there were tenants in the unit and the banks both took into account the rent coming in, even though he planned on moving in as soon as the tenants left (three weeks after settlement).

A good broker is a HUGE asset. Don't go direct to any bank, in my opinion.

I think the difference here is i do not have full time work, and i dont want my mum to be effected financially. If i had full time work, with my savings getting a loan would not of been a problem.
 
You could possible do it with your mum as trustee for you (bare trust). Later on you could probably transfer the title with nominal stamp duty and no CGT.
 
How much will the bank lend you on just your income?

Does your mum have equity in a property? What if she went and borrowed $100K(or whatever you need) against her own property and gifted this money to you.

Then you could buy the $500K property in just your name and get a loan for $300K just in your name. You make the payments on your mum's $100K loan and when you have enough income you can increase your loan to $400K and pay back your mum's loan?

Not advice, just a suggestion to possibly get around stamp duty and capital gains issues.
 
Hi Cmack,

Firstly:
1. Just because one bank has said no...doesn't mean ALL bank's will say no, a lot of bank will NOT have a restriction on the % of ownership, most do not even ask....

2. What's wrong with your employment? more like why did you get rejected? are you part time? causal? self employed? etc...

3. You can consider doing this in a trust, a lot easier and more flexible given what you want to achieve...your mum can be removed form the trust when required as well.

4. If serviceability is a issue ( ie based on payslips etc you can';t afford the loan) - what would you say if i told you there are lenders that will service your loan not based on SVR + 2% ( ~9%) but rather on a fixed rate of 7.3-7.5%.... could you afford the loan then?


Try not to make your life difficult by strictly following a bank's requirements ...but instead find a bank that will listen and accept YOUR requirements

Not sure what your finance looks like...maybe you can't afford the loan unless your mum is on the loan; but don't be restricted by the 20% rule!

Regards
Michael




Hi Investors,

I have been reading all your advice on here the last couple of years, big fan of The Y Man! And last Monday i made the leap and bought my first property :)

Heres my situation...

I am 22yo and had saved up a large deposit, although because i am still studying and not working full time i have been unable to get approval for a loan. The way i have worked around this is by getting a joint loan with my Mum, but i am the only one contributing financially because i still want this to be my baby :)

The bank said that my mum must have minimum 20% on the title to use her income to acquire the loan. So my property will be 80 my name, 20 my mums. The arrangement i have with mum is she will not pay a cent, and has just done this so i can get in the market now. I will rent it out for a few years and when i can afford to do so, i'll move into it and get her off the loan and title.

Has anybody has a similar experience? I just want to know about the process of getting the 20% in my name down the track. I heard today that i will have to pay stamp duty on 20% of the value of the unit aswell as transfer fees :(

Thanks guys
 
Hi Cmack,

Firstly:
1. Just because one bank has said no...doesn't mean ALL bank's will say no, a lot of bank will NOT have a restriction on the % of ownership, most do not even ask....

2. What's wrong with your employment? more like why did you get rejected? are you part time? causal? self employed? etc...

3. You can consider doing this in a trust, a lot easier and more flexible given what you want to achieve...your mum can be removed form the trust when required as well.

4. If serviceability is a issue ( ie based on payslips etc you can';t afford the loan) - what would you say if i told you there are lenders that will service your loan not based on SVR + 2% ( ~9%) but rather on a fixed rate of 7.3-7.5%.... could you afford the loan then?


Try not to make your life difficult by strictly following a bank's requirements ...but instead find a bank that will listen and accept YOUR requirements

Not sure what your finance looks like...maybe you can't afford the loan unless your mum is on the loan; but don't be restricted by the 20% rule!

Regards
Michael

Thanks for all the replies guys, your advice has all been amazing. (I didn't think id get any replies) I have learnt a lot very quickly, and that is there is so much more for me to learn. Nothing is really wrong with my employment but im only casual as i am still studying. The few banks we spoke to required mum to have 20% of title and due to signing a really short settlement we have signed with westpac. So this is the new situation...

Property: 500k (bayside melbourne/beach road)
Finances:100k deposit/400k loan
Title: me 80% mum 20%

I will be renting this out whilst staying at home and completing my studies and then plan to either A: Move in or B: Rent somewhere myself and when i can buy a PPOR and claim my FHB grant.

Does anyone have any tips on how to make the most of this situation i have got myself into? Either on how to get mum off the title in the shortest amount of time or on how to re-invest (the obvious answer is get a full time job/ also i plan to never sell my properties)

Thanks guys, i appreciate your responses.

Cmack
 
Since you been causal for 3 years + - Westpac will accept your employment with 100% income- just show last 3 years group cert.

Can you afford the loan with your income only + the income from the rental?

Regards
Michael
 
is the property in mentone?

go and see a decent broker they will get it through in your name only or 99% to u and 1% ur mum

ditch the branch and westpac

there are many ways to skin a cat but by dealing with a branch muppett u r using a blunt knife
 
Hey Mike C,

That was the problem, i have been earning about 20k a year in this casual job which they included, but all my other bits and pieces couldn't be accepted, thats why mum had to be involved for this to happen! I am living at home but they still had this formula to calculate living expenses (even though it was much higher then mine), but i have worked out i can service the loan by myself with income and rent.

Since you been causal for 3 years + - Westpac will accept your employment with 100% income- just show last 3 years group cert.

Can you afford the loan with your income only + the income from the rental?

Regards
Michael
 
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