Les
Reply: 1
From: Mike .
Re: Grandma as Guarantor
From: Les
Date: 4/14/00
Time: 11:58:40 PM
G'day James,
Before I start, let me echo words from earlier in the forum "Don't get ANYONE to go guarantor for you". Those words serve as a reminder that "the best-laid plans of mice and men go oft astray..." And if they go astray, someone else hurts if they have gone guarantor!!!
Now, with that aside, let me see ....
A few points:-
1. Depending how you buy, a deposit is not that necessary, but a savings record probably IS (to convince a Bank that you are a good risk... )
2. Yes, some IO loans can allow payments off the Principal, usually with some restrictions. P&I can nearly always have extra payments made on it (except for some "honeymoon" rate loans).
3. Jan (and others) say that arranging the finance is the MOST important part of buying a property, so check a bunch of them out, and take the BEST one for you.
4. If the plan is to get Grandma off the mortgage ASAP, then this shoud be roundly discussed with your lender. Find out all of the costs, requirements, limitations, etc. regarding doing this. Get it in writing. Know at what point they will accept the removal of her name - e.g. when your LVR has dropped to 80% maybe. Do you need to refinance to do this? At what cost?
5. Consider an "off-the-plan" purchase - if you can find a well-known, well-respected builder who is going to build in a suitable area, and can swing a deal (many builders need to sell a percentage "off-the-plan" to assist their financing of a project), then you can take a contract on it NOW, at today's price (discounted?) and pay for it tomorrow (at settlement) when it's value has already gone up. By choosing a Bank that will allow you to finance the purchase depending on the future growth, you could, for example, contract to purchase a unit for $250k (to be built in 12 month's time), and finance it near settlement when its value is $300k. If your lender loans 85% on market value, then that means a mortgage of $255k. You are buying for $250k, so have another $5k to put towards the costs (PLUS your First Home Buyers $7k subsidy if you are eligible). Effectively, you MAY NOT NEED Grandma as guarantor at all!!!
6. Re financing, look at a cocktail loan (part IO, part P&I). If you find out how much you need to reach to get Grandma off the hook, then set a P&I loan for that amount, and the rest IO. In that way, you have a goal to work towards - as soon as the P&I loan is paid, she's free. You then leave the IO loan alone and save for your next IP. This maximises your Tax Returns.
7. Set up a 221D Tax Form (reduces the Tax payment on payday) and pay the extra money in your paypacket straight onto the P&I loan.
I'm sure I haven't covered it all - but this should point you in the right direction. Do come back with any more questions, James.
Regards, Les
Disclaimer: I am not an adviser, just a bloke with an opinion - so check the above with the proper people, won't you.
