PPOR loan in three names

I have a family member who is currently having difficulty obtaining a loan for a ppor. I have been asked to go guarantor for him.
I am hesitant to do this and have looked at an option of three family members buying the property and each holding one third of it. If the three of us take a bank loan and are on listed on the loan am I only responsible for one third of the loan or do the banks consider each of us wholly responsible for the entire loan amount in the event that the other two do a runner so to speak.
Hi July,

3 names on a loan/property...sounds too hard to me and what happens when 1 of the 3 wants to sell??

Dear July,

Lending money to relatives is always difficult.

Generally I agree with the Cashflow Game card "Never lend money to relatives". However when emotion comes into play being a son or daughter it can become a grey area. But the reality is you must make it less grey otherwise you may pay for it in the end.

Important to go back to:

What do you want to achieve through this?

Why is the family member having difficulty getting the loan?
-LVR (Loan valuation ratio) - Not big enough deposit for the property in question?
-DSR (Debt servicing ratio) - Unstable work history, short-term employment or too big a loan to service?

If he does not have a big enough deposit then you need to make sure that he has some committment to this. The concept of "hurt" money is real as if it was not your money in the first place it can be easier for a person to loose with less responsibility...... However if you want to proceed limit your risk by arranging a deposit loan to him with him paying all the setup costs. Then your risk is only up to the deposit amount if you are comfortable doing this.

If the problem is that he can't borrow enough money by himself maybe he should be looking at a less ambitious property. It can be easy for someone to live beyond their means at someone else's expense. With employment still being in a probation (3 month) period the simple thing is time.

Find out what the difficulty getting the loan is. By knowing this you can then know whether this will become a short-term or long-term fix.

Personally if it is an issue with something related to servicing the debt (DSR) then I would look long and hard at the reasons. There are many "lo-doc" loans thesedays. Otherwise you are at a greater level of risk. With it just being a deposit related issue (LVR) then I would still want him to have some "hurt" money however would be willing to do up a legal loan at a higher interest rate for the rest of the deposit.

Simply going as guarantor without knowing the reasons is not as simple as it sounds. As Glenn said I do not believe that your risk is limited to one third and your potential risk is greatly amplified.

For more information I would suggest that you talk to Rolf or Richard. They could look seriously at the situation and see whether your family member could qualify for a lo-doc loan without you being involved at all. In the case that they are not successful they could give you constructive input on how your could setup your deposit loan and whether this could be a viable alternative.

Try to keep it black and white. Grey areas cause us to make financial mistakes....


Hi July

Tis called several and joint liability. You will be held liable for the lot if it goes bad.

Same qs as Sunstone - why are they having twoubles - specifically as stated by the lender ?


NOT only are you probably liable for the lot, if you read the fine print you will probably find that the bank has the right to vary the amount of the loan , and you will also be liable for the banks legal cost involved in sueing you to get "their " money back of you.

When I was setting up my business 14 years ago I wanted an overdraught of 6K. The gaurantee that the bank wanted my father ( or any one with equity ) to sign basically had no limits on his liabilty.

Be Afraid .... Be very Afraid

see change

Very good point. Most residential type guarantees are LIMITED, but I personally know someone that was wound up by the ANZ, and in the end the recovery expenses bankrupted them.


Why not one name?


Why is it the family member cannot get a loan on his own?

There are plenty of different products out there to suit folks who don't fit the normal criteria- perhaps your relative might qualify for something a little less traditional.

I just helped a uni student on a casual income into a home after he told me it was impossible - at a normal basic variable rate.

In addition many banks are shying away from guarantors, especially from parents. Something to do with them striving to be good corporate citizens!