Avoid Joint Ownership Like The Plague!
Hello Jillian
Welcome to the Forum
As your daughter has just started work there will be a number of short term restrictions imposed on her which she can use to her advantage:
In order to borrow to 95% Loan to Value Ratio she will need to have held her permanent full time job for not less than six months. This gives her time to clear probation and to settle in.
In order to borrow to 95% LVR she will need to demonstrate that she has saved 5% of the purchase price, or has held + saved 5%, over six months. So she can start saving with her first pay and save the ‘mortgage payments’ steadily over the six months.
5% is called Genuine Savings and must be money saved from income, or a lump sum held for the qualifying period.
First Home Owners Grants are not included in Genuine Savings requirement but she still must show that she has the Funds to Complete the transaction.
Basic costs involved with the purchase are:
Purchase Price $300,000
ACT Stamp Duty for First Home Buyer $20
Transfer Registration Fee $189
Mortgage Registration Fee $96
Solicitor / Conveyancer $1,000
Search Fees & Charges $300
Lender’s Establishment Fees eg $750
Estimated Funds to Complete: $302,266
So all up, she will have needed to save $15,000 over the six months while she qualifies for the employment conditions
The FHOG runs through to 30th June, 2010 (may be extended but that’s a decision for the Commonwealth Government)
A loan to 95% would be $285,000.
Savings of $15,000 plus FHOG of $7,000 = total funds available $307,000 – enough left over for a celebratory pizza dinner!
The lender would allow capitalisation of the mortgage insurance (about $5,800) , so the total loan would be about, say, $290,800
Principal & Interest mortgage payments at eg 6.69% (just to allow for some interest rate increases over the next six months) would be about $1875 per month.
If she saves $1,875 per month x 6 months she will have $11,250, so she will have to save a bit more to qualify for the 5% requirement.
To qualify for a loan of about $290,000 she would need to have a gross income of about $50,000 and have no debts, HELP etc – if she has any debts then she would have to be earning more.
Does this help? There is no real way around the six month employment requirement for loans over 80%LVR so she can use the six months to qualify for time and for savings.
With a bit of diligence, she will be inviting you over to her place for Christmas Dinner this year!
But Jillian – avoid Joint Proprietorship like the plague
Plus, if you have previousy owned property your Daughter would not be eligibe for the FHOG grants and stamp duty concessions, so your joint purchase could end up costing a lot more than you think.
I am refinancing a customer who bought with her parents seven years ago – she is now paying nearly $20,000 in stamp duties to change the ownership of the property and her parents will be liable for tax on the capital gain even though she is not paying them anything and has never paid ‘rent’ on the property. To say her Mother is rather cross is an understatement!
It is far better for your Daughter to wait another few months and to buy independently than to go for what may look like an ‘easy’ solution now.
Cheers
Kristine