Home Purchased by Relative, Have Been Making Repayments - Now Want to Refinance with a Bank, Is This Possible?

[Deactivated] on 02/05/2017 - 21:16

Hi Ozbargain, you have been a helpful community in the past and I would like to put another question to you all - possibly those working in the banking/financial sector will be best placed to help?

I purchased my first home in May 2015 and instead of getting a loan from the bank a wealthy relative suggested he pay for the home in full to avoid LMI and other mortgage fees and I repay him at 5% interest. The arrangement is still working well 2 years on having never so much as been late on my fort-nightly repayment.

I'm hoping now to switch my "loan" to a financial institution. As the property was a cash sale, is this at all possible? The reason for wishing to change the current arrangement is because I would like to purchase investment property in the next 12 months.

Thank you for reading, any help or advice will be appreciated!

Financial

Comments

  • mskeggs on 02/05/2017 - 21:26
    +1

    There should be no obstacle, assuming you meet the lenders criteria for getting a mortgage.
    Have a talk to a mortgage broker and explain your situation.

    • [Deactivated] on 02/05/2017 - 21:33

      Thanks mskeggs, I appreciate your response and other feedback you provide! Yes I did speak to a broker and he claimed it is possible but then explained all these other fees etc and finished by saying some banks may not take up the loan. It left me more confused. I think I should probably go directly to banks. Thanks again.

      • mskeggs on 02/05/2017 - 21:50

        Sorry, I think I misread, and didn't see the title.
        Are you saying you own the property, with your name on the title, and pay money to the relative to repay the amount they loaned you?
        Or they bought the property, and their name is on the title.
        Because if it is the second option you will need to pay stamp duty to transfer the property into your name, and the relative is likely to face a CGT bill.

        • [Deactivated] on 02/05/2017 - 22:21

          For many of the cheapest and most common lenders a transaction such as the one you describe may not be in their usual comfort zone or may be considered to be unusual (and is likely to encounter close scrutiny).

          Why?

          From the sounds of your post you are effectively proposing either a very large equity release (which could be complicated depending on the percentage of the property value the loan represents and/or the loan size) or the refinance/discharge of a first registered mortgage held by a private lender to a new lender (such as a bank).

          What you definitely don't want to do is approach a number of lenders and get multiple hits on your credit file whilst trying to obtain a clear indication of pricing and terms. Dependent on the specifics of your scenario, you may find the differing rates, fees and credit terms to be surprisingly broad - as such, an experienced mortgage broker (which unfortunately does not sound like the person you spoke with) should be able to neatly provide you guidance on this once they have a clear idea of the specifics of the transaction (vis a vis they know your credit profile, how the existing loan from the relative has been collateralised, whether a history of timely repayments can be demonstrated, etc).

          Hope this helps.

        • [Deactivated] on 16/05/2017 - 22:45

          Sorry, no my name is on the title. So all I want to do is be paying the bank back instead of my relative.

  • chumlee on 02/05/2017 - 21:44

    Does your wealthy relative have covenant over property or anything like that as banks will not be receptive to this?

    • [Deactivated] on 16/05/2017 - 22:45

      No he doesn't, the title is in my name only and he really has nothing to do with it. My lawyer has all the paper work.

  • garetz on 02/05/2017 - 22:51
    +2

    Who actually owns the property, ie is the title under your wealthy relatives name, or your name? If its under your wealthy relatives name, it is basically impossible, there will be tax implications for your wealthy relative, not to mention transfer of title. It could cost you 10s of thousands if not 100s of thousands.

    If i was a cynical person(which i am), i would say you have been scammed.

    • [Deactivated] on 16/05/2017 - 22:46

      It's under my name, my mortgage repayments are similar or slightly less than what rent would be on the property so I am
      Confident I haven't been scammed.

  • AMLagonda on 03/05/2017 - 00:21

    I really think you would have to speak to a solicitor or a Settlement agent as you will have to hand over the land title deeds to a bank that "might" deal with you and there are so many legal and technical obstacles that could not be answered on an internet forum.

  • eqv on 04/05/2017 - 00:26

    Can't you do something like a home equity loan? Borrow money from the bank based on the value of your home, and use that money to pay off your rich relative. That way your loan will be with the bank.

    • [Deactivated] on 16/05/2017 - 22:47

      Yes that's the sort of way I'm thinking. Is this possible? I suppose I will put this idea and similar ones to a broker and see what they say! Thanks

Login or Join to leave a comment
Login Join