Individual borrowing Capacity AFTER buying using Tenants in Common

[jerrybee]

Surely there must be a way around this?

It is hard to say no to the benefits of an investment partber over potential challenges for future financing, especially because it seems so unfair and non-beneficial for banks to have such ridiculous servicing calculations as 30% of income but 100% of loan.

Really, has nobody ever managed around this problem?

1) Some banks are OK with this, but there may not be many banks willing to do this in the near future. AMP is now a no-go for example, effective 18 May.

2) Maybe some sort of trust? I know nothing about trusts but maybe there's a way to structure it.

 

[Rolf Latham]

Really, has nobody ever managed around this problem?

not ethically or with full disclosure

ta
rolf

 

[Gennady]

Dare I ask how one could manage around it unethically?

 

[Rolf Latham]

Dare I ask how one could manage around it unethically?

lie and commit fraud........................

ta
rolf

 

[jerrybee]

lie and commit fraud........................

ta
rolf

How, surely the banks check ownerships of other properties etc during the application review process?

 

[Peter_Tersteeg]

1) Some banks are OK with this, but there may not be many banks willing to do this in the near future. AMP is now a no-go for example, effective 18 May.

2) Maybe some sort of trust? I know nothing about trusts but maybe there's a way to structure it.

Actually a trust can work quite well. We've disclosed all the income and liabilities of the trust and the lenders simply take it at face value that it's all going to one entity - the trust.

You don't quite disclose everything, but I've never had a lender ask me for a trust deed that they weren't lending against either.

The best way to get around all this is...
* Only invest with your wife/husband/life partner.
* Do everything with that person.
* Trust them implicitly.
* Commit to this for the rest of your life.

 

[Terry_w]

Surely there must be a way around this?

Around the borrow capacity effects?

There is not because if you borrow money you are liable for its return. On a joint loan each borrower is liable for the whole debt, not just their 'half'. But from a tax point of view their income is only the percentage relating to their ownership of the property.

 

[Terry_w]

* Trust them implicitly.
* Commit to this for the rest of your life.

Trust is needed to a certain extent, but if spouse each get one property in each name then they are 'even' in a way. If one does a runner, the other still has their own property.

It is also possible for the non-owner spouse to lodge a caveat on title to prevent further dealings. But this can weaken asset protection so seek legal advice before doing this.

There are also provisions in the legislation around wills to make claims against a spouse's estate where the property is left to someone else other than the surviving spouse.

 

[Brady]

CBA does property share. Loan in each applicants name guaranteed by the other party.

 

[Peter_Tersteeg]

CBA does property share. Loan in each applicants name guaranteed by the other party.

The property share policy with the CBA is a great idea (although I don't know if it's really helpful in this instance). I'm yet to determine if other lenders are accepting of it, although I can't see why they shouldn't be.

My only real annoyance with it is that the CBA doubles up on the fees. It involves an application for each share which leads to the bank fees being duplicated across each share. This means either each person has their own pro-pack fees ($395 each) or whatever other fees are applicable based on the product.

 

[Brady]

It's a good product and it woks.

Regarding fees can't have your cake and eat it as well. If the product suits the fee is worthwhile, and I haven't found too many that use the property share that don't have or planning to have other personal lending

 

[Gennady]

I am finding out about the CBA property share product now... seems like a good option. Is there any guarantee or way to know how other lenders will treat this when i approach them for a loan individually and that they won't count my sibling's loan for which i need to be guarantor?

Also, do you know any other lenders that offer property share products? I haven't found any yet?

Another question comes to mind, how will equity release work for the loan?

Thanks!

 

[Rolf Latham]

I am finding out about the CBA property share product now... seems like a good option. Is there any guarantee or way to know how other lenders will treat this when i approach them for a loan individually and that they won't count my sibling's loan for which i need to be guarantor?

I have been here before

I have asked CBA for evidence in writing that they wont foreclose on the property if one side of the loan pair doesnt pay............................

Crickets for a loooooooooooooong time now,

ta

roof

 

[Terry_w]

I am finding out about the CBA property share product now... seems like a good option. Is there any guarantee or way to know how other lenders will treat this when i approach them for a loan individually and that they won't count my sibling's loan for which i need to be guarantor?

They will count the whole loan generally - even guaranteed portion.

 

[tobe]

Id wager the cba assessor will take the whole loan into account and only half the rent the next time you did lending with them as well.

 

[Marty McDonald]

I agree with Rolf...because they can't sell half a house the product CBA offers is a marketing exercise and as each party guarantees the other you are each liable for the whole amount. No matter how you cut it.

Why go to trouble of guarantees and legal advice and 2 sets of fees etc. You'd be better off in my opinion borrowing via 2 joint loans and having an agreement that account no 123 is mine and account no 124 is yours etc. AND internet access to both loans so you can keep an eye on it.

 

[Brady]

I have been here before

I have asked CBA for evidence in writing that they wont foreclose on the property if one side of the loan pair doesnt pay............................

Crickets for a loooooooooooooong time now,

ta

roof

I don't think that's the point Rolf. You have to expect that it can be sold off, it's a guarantee not a free lunch. How could you expect the bank to take 1/2 security, don't even know why you would bother asking.

How about this, tell me how other banks consider the debt for the other person that you guarantee. It's only a security guarantee so it shouldn't effect the serviceability of future loans in individual names which is the whole reason for the product.

 

[Brady]

Id wager the cba assessor will take the whole loan into account and only half the rent the next time you did lending with them as well.

I'll take that bet.

 

[Brady]

I agree with Rolf...because they can't sell half a house the product CBA offers is a marketing exercise and as each party guarantees the other you are each liable for the whole amount. No matter how you cut it.

Why go to trouble of guarantees and legal advice and 2 sets of fees etc. You'd be better off in my opinion borrowing via 2 joint loans and having an agreement that account no 123 is mine and account no 124 is yours etc. AND internet access to both loans so you can keep an eye on it.

Liable yes, it's a security guarantee. Always going to be liable.

Because it's not that much trouble, and who really pays that much fees these days? What a wealth package fee, likely have a loan already. Still only 1 settlement fee as it's only 1 property. And paying a once of legal fee to allow you to borrow in your own name without servicing being impacted.

One week you brokers bang on about fees and rates not being important, now you're saying easier to lump together joint debt which will impact future servicing. How many of you have actual done a property share application?

 

[Peter_Tersteeg]

I've written a couple. In each case between siblings purchasing their first property jointly. They've done it this way because it somewhat reduces their exposure to each other when they purchase separately in the future (which they probably will sooner or later). That is assuming the guarantee can be ignored by other lenders of course.

I don't like the duplicated fees because I feel they're unnecessary. This is a product that's unlikely to have a high turnover and thus will be fairly profitable. I wouldn't be bothered by a modest fee for setting up guarantees, but to have the ongoing fees duplicated for the life of the loan is a bit rich. It doesn't cost the CBA any more once the facilities are established.

I think it's a great idea and innovative. I hope other lenders duplicate and recognize it. I just think that some of the costs aren't entirely justified.