First home owner borrowing with a non first home owner.

[sebsez]

Hi All,

I am looking at buying a place with my girlfriend, she is a first home buyer, I am not. Obviously if we buy together (both on the title deed) then she loses the FHOG and the stamp duty savings. Also considering house prices in WA at the moment, she would not have sufficent income to afford a $350K loan on her own.

What I am investigating doing is for both of us to take out the loan but for only her name to be on the title deed, therefore allowing her to get the FHOG and stamp duty savings.

My first question is, will banks allow this? Will they allow the security to only be in one persons name?

Secondly, on the FHOG application there is a question on how many people have "relevent interest" in the property. Looking up the definition of this term it is defined as the person who's name is on the title deed. However when I called the office of state revenue up they said that my girlfriend would not be eligable for the FHOG because if I will be on the loan and hence would have "relevent interest" in the property, even if my name is not on the title deed.

Does anyone have any expirence with this? Or comments?

Cheers

Seb

 

[alexlee]

Seb, can you detail when you bought a property previously and whether you've ever lived in it? That may change your eligibility.
Alex

 

[sebsez]

alexlee,

I should have mentioned that I have already received the FHOG and have lived in my PPOR back in 2003.

Also, my girlfriend and I are not considered defacto or spouses as we have not lived together for more then 2 years.

In the application form all the questions relate to the "Applicant" now the applicant is defined as "A Person(s) who, on completion of the purchase of an established home or construction of a new home, will be the owner" Considering I will not be on the title deed, I will therefore not be an owner of the property and hence not an "Applicant" of the FHOG.

 

[alexlee]

I should have mentioned that I have already received the FHOG and have lived in my PPOR back in 2003.

Also, my girlfriend and I are not considered defacto or spouses as we have not lived together for more then 2 years.

In the application form all the questions relate to the "Applicant" now the applicant is defined as "A Person(s) who, on completion of the purchase of an established home or construction of a new home, will be the owner" Considering I will not be on the title deed, I will therefore not be an owner of the property and hence not an "Applicant" of the FHOG.

I see. I was just thinking about that bit where you can buy an IP after Jun 2000 and still be eligible for the FHOG.

I wouldn't want to bet on the time period for the defacto relationship (from the NSW OSR website):

Note: There is no minimum period of cohabitation which defines a de facto marriage under the Property (Relationships) Act 1984.

Also, given this definition it's very hard to justify you not having a relevant interest if you're on the hook for the mortgage:

Applicant: A person who, on completion of the purchase of a home or construction of a new home, will own or have a relevant interest in the land on which the home is built.

Just make sure you set up an offset account.
Alex

 

[sebsez]

Alex,


The definitions in WA seem to be somewhat different, these are from the OSR (WA) website and they conform with what is in the First Home Owner Grant Act 2000. Now under the definition of relevent interest I do not see that by being on the mortgage that I fall into any one of those relevent interest categories. But please point out if I am misreading any of the below.

"Relevant interest - A relevant interest in a home includes :

1. An estate in fee simple in the land;
2. A life estate in the land approved by the Commissioner;
3. A perpetual lease of the land granted by the Commonwealth or the State;
4. A leasehold interest in the land granted by the Commonwealth or the State that may be converted under the terms of the lease or by statute into an estate in fee simple;
5. An interest as a purchaser under a contract for the purchase from the Commonwealth or the State of an estate in fee simple in the land by instalments;
6. A licence or right of occupancy granted by the Commonwealth or the State that gives, in the Commissioner’s opinion, the licensee or the holder of the right reasonable security of tenure; or
7. An interest in a company’s shares if the Commissioner is satisfied that-
The interest entitles the holder of the interest to exclusive occupation of a specified home owned by the company; and
The value of the shares is not less that the value of the company’s interest in the home.

and also, spouse definition:

Applicant’s spouse - A person is the spouse of an applicant if, on the commencement date of the eligible transaction to which the application relates, the person is legally married to the applicant or -

(a) The person with whom the applicant lives on a genuine domestic basis, although not legally married; and
(b) On the commencement date of the eligible transaction to which the application relates the person has lived on that basis with the applicant for at least two years.

 

[steveadl]

This may not be the most desirable solution, but have you thought about getting a low doc loan in just her name? ie. she doesn't have to prove her income, only her name goes onto the deed so she can pick up the FHOG, but you can both put money into the loan?

Then later on if you want to, she can refinance into a more desirable loan once the debt has gown down etc.

 

[Peter_Tersteeg]

If you're applying for the loan because your girlfriend can't service the debt on her own, the bank will most likely need you to have a relevant interest in the transaction.

A relevant interest (by most lenders definition) is usually established by you being on the title as owning part of the property. This would probably disqualify your girlfriend from being eligible for the FHOG.

I could be wrong on this as I'm not as familiar with WA requirements as I am with Victorian requirements. Speak with your conveyancer or solicitor if in doubt.

 

[sebsez]

Thanks for the replies everyone!

Peter - I am going in on the loan to enable us to borrow more, my girlfiends income alone will not be enough to get what we want. So what you are saying is that banks will not lend to two people and only have the security in one persons name? But I will be following this up with my conveyancer on Wednesday.

Steve - The only problem with Lo Doc is that they require 80% LVR, we are looking at a 95% LVR for this loan.