How to transfer ownership to spouse and maximise new debt?

Our medium term plan is to transfer our current PPoR from my wife's name to mine, and turn it into an IP. (Vic so no stamp duty)

There'll be about 50% equity in the house, so I'm trying to get my head around the most effective way of leveraging it as much as possible, as it'll all be tax deductible, and whatever I can borrow will go to the wife to buy our next PPoR.

How do banks handle this type of thing? Let's say the valuer says it's worth $1m, and there's a $500k mortgage on it at the time of transfer. Will they be happy to give me an $800k mortgage, and give my wife $300k cash?

And if (big if) the LMI market gets back to normal in 12-18 months time, would they be happy to give me a bigger loan, with LMI?

The mortgage is currently with CBA.

Cheers
Jonathon
 
Hi Johnathan

we deal with sort of thing on a "daily: basis as bread and butter business.

An 800 lend subject to the usual seriviceability( income vs debt) issues would be fine wothout LMI.

Depending on what you are trying to achieve and the availabilty of other property, a 105 % lend may be avaiable to re geat that property

ta
rolf
 
how does the transfer between spouses need to be transacted?

Hi Rolf,

I am currently dealing with a very similar situation and wanted to get an understanding of how to go about transacting it to ensure that it is all above board:

- We are currently living in our PPOR and have purchased a new house which we intend to live in (settles in 3 months).
- We are intending to retain our existing house and use it as an IP. The house has been structured with IO and an offset, however it has also built up quite a lot of equity that we want to access and use as tax effectively as possible in the settlement of the new place
- We are planning to transfer/sell the existing PPOR from my name to my husbands. He will then borrow against the current value and give the proceeds to me to contribute to the new house.
- Our primary reason for the transfer is asset protection, and we have then been made aware of the possibilities in respect to the refinancing.
- My understanding is that this will avoid SD (vic) and CGT

My questions are:
- In what order do things need to occur for it to be transacted correctly.
- My husband will not have sufficient income to borrow the full value alone. Am I able to be co-borrower, or guarantor on the loan. (The way the current loan is structured, and the one for the new house, is that 1 person owns 100% of the property title, but we are both jointly liable to meet the mortgage).
- How does the ATO view this?

I would really appreciate any help.
thank-you
 
Hi TJ

What u describe should be doable, and the order seems right

even the borrowing business isnt a problem, since the title determines tax deductability AND who pays tax on inome is what matters, not who is on the loan.

U might run into minor issues depending on the lender. Some dont see it the way the real world sees it.

ta
rolf
 
Thanks Rolf,

Another quick question. Does the consideration (current value) need to be included on the transfer form? or just determined once valued by the banks in finance process? Is it the standard T1 form?

thanks again
 
Heya Rolf

I too am looking into this as an option, however my situation may be complicated by other loans against the current PPOR in different names. I'll run by the situation with some minor details:

My current PPOR is in the name of both my wife and I (joint tenants) and we have a main loan which is around 50% LVR of recent bank valuation. Also against this property though is another loan which formed a 20% deposit for an IP a couple of years ago (fixed for another 3 years). This IP was purchased as tenants in common (99% me, 1% my wife) and therefore the loan against our PPOR is also in both names. We also have a LOC against the PPOR (in both names) which is largely untapped.

If I sell my half of the PPOR to my wife so that it is entirely in her name as an IP (and positively geared), what are my options with the other loans taken out against the PPOR in both names? I suppose the LOC is no big deal and could be shifted to the new PPOR which I would buy (assuming there was sufficient equity) or just extinguished, however the 3 year fixed rate loan in both names really needs to be securitised against the old PPOR if we are to buy another PPOR using only a deposit from my equity accessed through the 50% sale. But I'm assuming there are issues if it the old PPOR was to be transferred exclusively into my wife's name?

Cheers

Luke
 
Luke

There is a few options which would include:

1) Revaluing the existing IP and getting the lender to increase the loan to repay that portion secured against your PPOR.

2) Sell the majority of the PPOR to your wife but still keeping say 1% yourself as a Tenant in Common.

Course this assumes your lender has any clue at what they are doing.
 
Thanks Richard.

If I went with option two, would I be able to have a loan secured against the old PPOR in both names as previous deposit for first IP if I only owned 1% yet the loan is more than 1% LVR?

Also, can I do this if we are currently joint tenants rather than already tenants in common?

Cheers

Luke

Luke

There is a few options which would include:

1) Revaluing the existing IP and getting the lender to increase the loan to repay that portion secured against your PPOR.

2) Sell the majority of the PPOR to your wife but still keeping say 1% yourself as a Tenant in Common.

Course this assumes your lender has any clue at what they are doing.
 
Luke,

Another possible way to do things is to set up a LOC on a property with equity. You can then use this LOC to pay all investment related expenses and investment interest. This will free up your cash to rapidly pay down the new PPOR loan.

You need to be careful when setting this up so as it doesn't look like a scheme, but a good accountant should be able to help you and possibly get a private ruling.
 
Luke,

Another possible way to do things is to set up a LOC on a property with equity. You can then use this LOC to pay all investment related expenses and investment interest. This will free up your cash to rapidly pay down the new PPOR loan.

You need to be careful when setting this up so as it doesn't look like a scheme, but a good accountant should be able to help you and possibly get a private ruling.

Hi Terry

Thanks for the suggestion. I have already employed a debt recycling strategy by taking out a LOC against the current PPOR which pays for all expenses associated with the IP so that I can direct rental income into paying down PPOR debt. To me it's a great idea that already seems to be working. I reckon with a couple of IPs this would work even better with substantial rental income

I'm still stuck though with the issue of names on loans and from which property to pull this equity.

Cheers

Luke
 
Luke

All you would so is create a private mortgage document lending the money as TIC to you both as JT at the same rate.
 
Top