Purchase PPOR from Parent

[xcesiv]

Good morning everyone

1 serous thought at this moment is purchasing my mums place from her

My mum is looking to get a smaller place as a 3 bedroom place is way too big for her and is looking to simplify.

On the other side im looking for a larger house as in the coming years i will be looking to start my own family.

Here is the situation likely situation.
My partner and I are looking to move in Early 2011 as part of the purchase. My mum will live with us Part time over the next 12 months to 2 years while she looks for a house and decides what kind of place she wants. She will also be doing a bit of traveling over this time so doesn't plan to be home a lot anyway.

Our thoughts were.

* Get the place valued by 2-3 independent valuers to establish an agreed price

* Arrange a Vendor Finance for 100% of the purchase price.
* $50 000 LOC against existing IPs to cover Stamp duty and any other costs involved

* Transfer the Title into My Partner and my name

The Vendor Finance Agreement
* Vendor Finance Agreement between myself, my partner and my Mum
* 50% payable within the first 2 years.
(This will be the funds required to purchase her new place when she decides what she wants to do)
* Remaining Loan to be paid over an agreed time

My Questions are.
The house is initially purchased under a Vendor Finance agreement. After about 2 years we will be paying the 50% with 50% remaining under the Vendor Finance agreement.
1) What foreseeable issues may we need to tackle when it comes to financing the loan through a Bank for the 50% repayment

2) Should we consider setting up the initial 50% loan with a Bank from Day of purchase and leave the funds in the loan until the payment is required.

3) Is there any tax/stamp duty concessions or areas of stamp duty/Tax laws we need to keep clear during the purchase/sale process being its a purchase between 2 relatives.

4) Is there any other suggestions you may suggest, or different approches to the situation

 

[Shaneelastic]

My thoughts are

Is your mum happy with this arrangement

Why should she be happy with vendor finance?

There may be centrelink restrictions placed on her as the interest will be income, this will fall under loans to other people area

Whats her age, if shes less than age pension age and getting some type of centrelink support she would be mad doing it, better off to hide money in super somewhere.

 

[Mry]

This doesn't appear to be a rental purchase. Why are you worried about tax?

 

[xcesiv]

My thoughts are

Is your mum happy with this arrangement

Why should she be happy with vendor finance?

There may be centrelink restrictions placed on her as the interest will be income, this will fall under loans to other people area

Whats her age, if shes less than age pension age and getting some type of centrelink support she would be mad doing it, better off to hide money in super somewhere.

Mum does not get any Centrelink or Government benefits at all. She is not old enough to receive a pension or release her super for retirement.

She works permanent part time and also runs her own small business

Yes, my mum is happy with this situation. She first asked if i would consider buying the house a few years ago, but i was no where near able to afford it.

I am looking at it as a possibility now as i was starting to look for a PPOR around the $400 000 mark. This is a bit shy of the value of the house ($550 000). This is why Vendor financing is on the cards to assist with the difference.

We are looking at vendor finance as a short term thing.

For the first 2 years until the bank funds the transfer of chase she will also be living in the house part time while not traveling.

 

[depreciator]

Putting aside all the accounting stuff, I'm assuming any siblings you might have are okay with this? That's where it might get tricky.

 

[xcesiv]

Putting aside all the accounting stuff, I'm assuming any siblings you might have are okay with this? That's where it might get tricky.

I think you mean My mums siblings

I am her eldest Son and i have 1 brother.

He was offered the chance to purchase the house as well a few years ago when he was looking to buy his first PPOR, and like I did, declined. He purchased another property shortly after and now is in no place to purchase this place, even as an upgrade from his existing place.

My situation has changed dramatically in the last few years since i was first asked if i would buy the house, so i now need a larger house in the near future.

My mum will discuss the sale agreement with him to make sure its clear that she isn't giving me the house.

This is another reason we want to get the valuation done. We will purchase it for the average of the 3 valuations.

I want the paperwork to be thorough as well because my brother can be a bit greedy when it comes to money.

The Vendor finance agreement will also have clauses about if something was to happen before the finalization of the agreement.
EG: * If, for any reason, the vendor is to pass before the agreement is completed, the remaining amount owing under the agreement will be added to the total assets of the deceased and split between the beneficiaries of the will. (Which basically is myself and my brother 50/50)

 

[depreciator]

I think you mean My mums siblings

No, I meant you. So you have a younger brother. The accounting stuff is easy. It's the family stuff that's hard. This rings a few alarm bells:

I want the paperwork to be thorough as well because my brother can be a bit greedy when it comes to money.

 

[xcesiv]

Sorry... brain freeze there...your right.

Is the alarm bells ringing for you due to the vendor finance portion or the purchase of the house itself?

The house will be put on the market within the next 2 years if i am not to purchase the house, so either way its getting sold.

The idea came up in passing when discussing if she should do any renovations before she sells it, or just keep it as is.

My brother is greedy like a little kid. He is chasing money that isnt his...She isn't dead, nor is she planning to be for a long while...

I think there will be less issues between myself and my brother if the house was sold and not left to either of us in the will.

Leaving the family politics aside, is there any other issues i should be concerned with

With the financing side of it all, would you have any other ways to approach the situation

 

[depreciator]

There are people on here much better able than me to comment on the financing etc. I reckon however you skin it, if you end up with the home down the track your brother is going to feel aggrieved. If he's like this now...

My brother is greedy like a little kid. He is chasing money that isnt his...She isn't dead, nor is she planning to be for a long while...

...imagine what he'll be like when the estate gets carved up.

I've seen this exact scenario play out recently with family friends.

 

[xcesiv]

Im not looking forward to that time in my life when we have to split everything... It will not be easy at all

He has made it very clear to my mum and myself that he has no interest in owning the house so it wont be a fight to see who owns it. Its simple $$$ to him.

He wont care that if I own the house... Just as long as he gets his Money...

So for now im more looking at the structure of making the purchase possible and how to structure it all..

 

[Terryw]

If your mum has a loan on the property transfer of title couldn't occur until the mortgage is paid out.

 

[marg4000]

So you buy the house on vendor finance from your mum. I presume you are paying interest at close to market rates and your mum will hold a registered mortgage over the title?

What happens if your mum wants to buy a place and you can't get finance? As we have seen in the last couple of years, borrowing requirements can change.

It is probably not in your mum's best interests to be out of the property market for too long as prices can jump very quickly at times.

It may be best to do a straight purchase with borrowed funds. That way there is no contamination of your best interests with your mum's best interests. If your mum wants to live with you then she will be able to pay rent from the house proceeds.

At the very least, get good legal advice to ensure everyone's interests are protected.
Marg

 

[xcesiv]

If your mum has a loan on the property transfer of title couldn't occur until the mortgage is paid out.

There is no mortgage against the property