IP Loan Structure Q

From: Felicity W.


Hi all
Asking this question on behalf of some friends.
Basically, before they got together she bought a unit which she lives in and is paying off. Currently they are looking at buying an IP.
They want to keep the current unit in her name and live in it after they get married (will probably buy a house down the track and use this as a 2nd IP), and they want to buy the new IP in his name.
They've been told that if they hold the mortgage in joint names, her name has to be on the title of the new IP. Is this correct? I can't say I've heard this, but that doesn't mean anything!!
The suggestion has been to hold the new IP 99% in his name and 1% in hers, but how would that work? How could you prove it? Why would you do it if it's not necessary for the mortgage?
Keep smiling
Felicity :cool:
 
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Reply: 1
From: Paul Zagoridis


I've never heard of that, but I've never tried to do it either. The normal way of doing that is he takes the mortgage. She guarantees it if the financier needs both incomes for the loan.

Alternatively they can buy it as tenants-in-common so they can specify % split. But I don't think that's what they want to do. Having any % of the property confuses her accounts, records and tax reports.

Paul Zagoridis
Dreamspinner
 
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Reply: 1.1
From: Kevin Forster


Felicity

My wife has the title of our IPs in her name only and both our names are on the mortgage documents. So it can be done.

We didn't get any problems from the bank either when we went for the loan.

Hope this helps

Kevin
 
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Reply: 1.2
From: Sergey Golovin


Felicity,

Maybe the very same people who told them about it, need as much security as possible and are trying to sew everything up into one bundle?

Which comes back to question of income and equities as Paul just mentioned earlier.

If he can buy it on his own, why does he need someone else’s help?
Unless they want to do everything together – buy it, sell it, rent it out.

Serge G.
 
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Reply: 2
From: The Undergraduate


Hello All,

I am a newbie to this forum and has been lurking around reading all of your posts with interested. (Great forum!)

Didn't have anything to contribute to the forum, until now.

For Fecility - We have an arrangement similar to what your friend wanted to do. My brother has the title of our IPs in his name only and both our names (inc. my sister) are on the mortgage documents.

The only reason why my sister name is also on the mortgage documents, was because when we took out this mortgage all of us just started working and the bank wanted securiy to make sure that one of us can pay our mortgage if something happen.

We have also setup a trust, so I can claimed expenses from this IPs against my income (75/25 split on recommendation from our accountant since I am on a higher income)

We have this IPs for the last 12 Years now and in this instant the ATO have accepted this arrangement (so far). The only down side to this is; I will have to pay tax on income earn from this property now that it is +Gear :eek:)

The Undergraduate
 
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Reply: 3
From: Victor Mann


If i am repeating the previous replies forgive me. My exp as a broker has been that banks are required now to have both all parties on the mortgage documents as the consumer credit code (ccc) requires all co signors to have some benefit from the loan. (Hence the idea of tenants in common). If however the partners income is not required to service the debt then she would not need to be on the loan documents.If however in this case its is for business purposes and is outside the ccc then she does not need to be on the mortgage docs, its the bank being an old woman. (sorry to old women no offence intended)

Victor
 
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Reply: 4
From: Pierre .


Hi Felicity,

My wife and I have all our properties in either her name only or my name only with all our mortgages in both names. We have never had a problem with finance. We've done this through ANZ, St George and NAB. Try one of them.

 
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Reply: 5
From: Rolf Latham


Hi Felicity

AS always you will find different lender have different ideas. Some will look at household income and ignore issues of deeds and guarantors, others will not touch "third party guarantees".

Its as Victor says in this post, unless theres a clear link between the loan security and the resultant property then most lenders will not like it.


Rolf
 
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Reply: 4.1
From: Grant A-Y


Pierre,

What about tax deductiblity? Can a person who is not on the title but on the mortgage claim expenses?

Grant A-Y
 
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Reply: 6
From: Cathy Baxter


Hi Felicity

Actually did this - partner was higher income earner - he had the property title in his name but we applied for finance in both names. Was in the ACT.

Taxable income and tax deductions have always been in his name until we sold the property - no cap growth - bad investment. Learnt by the mistake.

Cathy
 
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Reply: 6.1
From: Steve Cockrane


Hi,

Well this is my first post too after only having found this forum a few days ago.
Generally speaking banks will only lend to parties who have "an economic" interest in a property and the easiest way for the poor dears to work this out is if both parties are on the title. They will relax a little if it's a husband and wife situation, what wife doesn't have an economic interest in her husband and visa versa? In a defacto relationship, like your friends, this "economic interest" is not so clearly determinable.
I'd suggest your friends talk to other banks, they'll find someone who'll lend on the terms they want in relation to who is on the title and who isn't. One solution maybe to cross-collaterise but I'd suggest against that.
 
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Reply: 7
From: Felicity W.


Hi all
Thanks for all the great feedback on this one, I've passed the information on. They are actually getting married in a couple of months time, which probably makes things a little more comfortable from the bank's point of view.
I'm just glad they're finally doing it!!! They're going to talk to a tax accountant on Friday, before finalising their mortgage application.
Keep smiling
Felicity :cool:
 
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