1st Home Loan Advice Sought, with a Twist!

[Deactivated] on 18/10/2016 - 00:35
Last edited 18/10/2016 - 08:32 by 1 other user

Parents are separating.
Mother keeps the house yet has to buy out a portion of it from my father.
She has no income.
I do.
I am looking to buy out his percentage.
No brainer to seek legal counsel upon this and steps already taken from all parties.
What I'm here seeking, is advice in regards to obtaining a first home loan, when it is only for a percentage ownership of the title.
I feel that banks will have issues loaning money upon part of the security, with the majority held by a third party and there is NO WAY that I'm going to allow them rights to entire title for a loan upon a minority of the property.
Or am I wrong?

I've no knowledge upon this and seeking informed suggestions/advice to follow up upon.

Financial

Comments

  • k-rokfm on 18/10/2016 - 08:45
    +1

    What is the super situation in the family? Super from both parties will be counted towards the relationship so this can count to what is to be split between them (not sure on correct terminology lol)

    Just as an example in my parents divorce my mum was a stay at home mum so had very little super however my dad was a fulltime worker so a lot more super. They decided that my mum would keep the house (with $x mortgage - i think that they split some of the mortgage) and my dad would keep the super. Im not too sure on the specific $ amounts

    • [Deactivated] on 18/10/2016 - 10:00

      He's keeping the super to offset the house value.

  • k-rokfm on 18/10/2016 - 08:48
    +1

    Also why not go to a bank and just see what they say. Im sure they would be able to offer you the options that are available. You may have to put both your names on the mortgage and "pay it back together" but i doubt you would be able to get a mortgage on 50% of the property

  • geek001 on 18/10/2016 - 08:50
    +1

    I think it may not be as difficult as you think. The house ownership and person who takes out the loan can be different people. Your mother should be able to take out the loan with both your names on the loan, even though the title will only have her name on it. Perhaps find a mortgage broker to get the best deal, I am sure they will be falling over themselves to talk to you. I think there is a few on OzB, not sure if any of them will see this and jump in to help you out tough.

    • [Deactivated] on 18/10/2016 - 10:02

      Considering my mother is retired, there's no way for her to pay back a loan, so can't see them lending her money, well at least if the loan is weighed against ability to pay it back.

      • geek001 on 18/10/2016 - 10:15
        +1

        When we bought our house, we had to put the house under my wife's name for personal reasons. I was working but she wasn't at the time, the loan was approved under both our names while the title is only under her name, so I am effectively her guarantor on the loan as she had no income. Maybe you can do the same and get a loan under both your names, but the title can remain under her name to avoid paying stamp duty. Just talk to someone, your bank or a mortgage broker, you might be pleasantly surprised.

        You may have to put the entire property as security, can't see a way around that one, which works in your favour as you do not need to come up with a deposit if you were to buy a house normally, as your mother already own part of house as "equity".

  • [Deactivated] on 18/10/2016 - 09:25

    Not a lawyer, tax agent, but I suspect what you want to do is easy. You can specify % ownership of a property, but as the property is not in your name, be prepared to pay stamp duty on the transfer of ownership to your name, which is otherwise waived in a separation scenario. Just an idea, but do talk to a professional.

  • JimB on 18/10/2016 - 09:42
    +1

    You can purchase 'Tenants in Common'. Very Common.

  • fruit on 18/10/2016 - 09:48
    +2

    Put it all on black

  • sweefu on 18/10/2016 - 10:22
    +1

    Some good comments above, but regardless of ownership %, bank will take registered mortgage over the whole property.

  • brotherfranciz on 18/10/2016 - 11:06
    +3

    I know you're not here to get our sympathy, but I'm sorry to hear that your parents are getting a divorce.

    Good luck with the loan.

    • [Deactivated] on 18/10/2016 - 12:33
      +2

      Thank you.
      Sad part is, if mental health facilities in this country were better, I doubt it would eventuate.

  • [Deactivated] on 18/10/2016 - 11:51
    +1

    Some general points to note (NB: not advice usual disclaimers apply):
    1. If you are seeking a mortgage collateralised against the home itself you need to be mindful that all people on title must be on the loan documents vis a vis if there are 2 tenants in common (TIC) owners of the property (say dad 30%/mum 70%) both of these TIC owners must either be co-applicants to the loan or be a guarantor of the primary applicant (i.e. if mum applies for the loan - your dad will need to be a guarantor to that application with his proportion of the property…and vice versa).
    2. A number of lenders would be reticent to provide a loan where you provided all the income to support the debt but had no tangible interest in the underlying collateral. As such, you'd probably need to demonstrate some tangible benefit you derive from being on the loan and providing debt servicing support. Ways to address that kind of concern may include residing in the property rent free and/or being on title for a minor percentage (perhaps even 1%). Ultimately, what will be acceptable will come down to the individual lender's position on the matter.
    3. As you've pointed out, it's a no brainer to get legal advice on this matter - it would also be a no brainer to get taxation advice regarding this matter because there will be a number of important considerations to do with tax and duties - both in transfer and in future.

    Hope this helps.

    • [Deactivated] on 18/10/2016 - 12:38

      Fathers name will be removed from the title once paid out for his share.
      I will be taking ownership of that percentage.
      Effectively, I am buying out his share.

      • [Deactivated] on 18/10/2016 - 13:36

        Noted. So the common practice in this kind of situation would be for the person buying in (you) to apply for a loan to purchase the proportion of ownership held by the outgoing party (your father). If you are using the home you are buying into as collateral, there is a chance you may be able to be the sole applicant, however, it is likely the proposed lender will require your mother to go guarantor with her portion of ownership. Some lenders, however, may require her to be a co-applicant. The factor that could make this complicated is that there will likely be NCCP Act considerations stemming from your mother being a retiree. What may be feasible will be a product of her net asset position, net income and the proposed use of the property/living arrangements. The general rule of thumb being:
        a) She will need to get a solicitor to sign-off on her having received legal advice about the implications of going guarantor or co-applicant.
        b) Most lenders would give you both an easier road to approval if her net asset position was strong enough to pay out the debt without requiring the sale of her PPOR.
        If the above proves too difficult, it may be easier to consider a scenario whereby your mother is not on title. However, as other posters in this forum have pointed out, situations where there is restamping, inter-family gifts, life tenancy agreements, etc will need will need well thought out legal and financial advice because there will be a raft of tax and possibly pension considerations.
        Best of luck with the process. Hopefully it isn't too burdensome for you and family. If you'd like any credit advice please feel free to send us a PM.

  • niner on 18/10/2016 - 12:47

    Can I ask why you're siding with your mother? Is it because your mother is retired or do you just genuinely love her more?

    I have friends in a similar situation. Parents are old and they're getting a divorce. Their children are grown up, so it's not that bad.

    • Euphemistic on 18/10/2016 - 13:09

      I can't see this as 'siding with mother'. There is an opportunity to help a parent out and get into the property market at the same time. Perhaps OPs father is already sorted for a house, or has income to be able to pay sufficient rent (perhaps with another partner). If roles were reversed and mummy moved out, then OP could be buying half share for daddy.

      • sparkles on 18/10/2016 - 14:30

        OP will probably end up with the house at some stage anyway. It's probably prudent to keep it rather than lose it and have her enter the rental market.

    • [Deactivated] on 18/10/2016 - 14:29

      Not really siding, yet have been left this situation by my other sibling, who sided with my father, which only further exasperated the situation.
      I was getting him treatment for his menral health issues, when my sibling came in, swallowed his lies and assumed them as truth, aiswd in checking him out with only partial treatment, leaving him realistically mentally incapacitated, yet legally allowed to be checked out of a mental health facility under his own volition.

      If I've the energy after this, I will be going after the license of the treating Psychologist.

      • sparkles on 18/10/2016 - 14:34

        Is your father of sound mind to be dealing with the proceeds of half a house? He wouldn't gamble it or give it away or anything crazy like that?

        • [Deactivated] on 18/10/2016 - 14:56

          Legally unable to do so without my mother also being formaly advised.
          Legally they both own it 100% from my understanding.

      • [Deactivated] on 18/10/2016 - 14:57

        Put it this way, doing this financially limits my choices for the future

  • sparkles on 18/10/2016 - 14:29

    Does she / your parents own it outright? Perhaps she could sign her half across to you?

    • [Deactivated] on 18/10/2016 - 14:53

      They do and I believe she's unable to due to penaion issues associated with doing so.

  • snook on 20/10/2016 - 15:11

    Sounds like a joint tenancy. I suggest you go to a conveyancer and ask them what the process is to change the title. After it is Tenants in Common, whatever the % you've decided, you simply apply for a loan and your father sells to you.

    "If you hold real estate as a Joint Tenant you can easily sever the joint tenancy and
    convert it to a tenancy in common. This is something which needs to be seriously
    considered in many situations especially where a marriage or de facto relationship
    has broken down."

    http://www.wkp.com.au/Sites/31/Images%20Files/Joint%20Tenanc…

    The whole property will be taken as security by the bank. Thems the breaks.

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