All Topics / Hotch Potch / Using wrap concept – is this workable/viable

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  • Profile photo of woodywhanauwoodywhanau
    Join Date: 2004
    Post Count: 12

    I have been reading with some interest the wrap concept. My question is this (may be a little long winded so bear with me)

    Hubby and I are wanting to get into the property market – we too have had a bad time over past few years – (sickness/deaths). We have finally started to get life back in control and have been saving madly. Have approx $8,500 at mo’. Trouble is not enough to get into market. Where we rent at the moment is being sold so we have come up with the following concept but don’t really understand how to work it. My mum has agreed to buy a property using equity from her own property. We then rent the house from her and pay all costs associated (mortgage,rates,insurance) which is going towards deposit? We would then buy the property in 2 years time. Is this the same as the wrap concept or are we totally off base? I’m just not sure where to go to get the info I really need in order to see if this works not only for us but for mum as well. All info would be most welcome.. Looking forward to learning more about this..

    Profile photo of FWFW
    Join Date: 2002
    Post Count: 478

    Yes, this is exactly like a wrap! The only difference would be that your mum may do things this way out of love for you, and as long as she’s not out of pocket, she’ll be happy. In a wrap the wrapper does have to make some money from the transaction!
    One thing you need to work out (and this will depend on what state you’re in!) is whether you’re actually BUYING the house from your mum, ie using a terms contract, or whether you’re leasing it with an option to buy.
    Make sure you have a wrap savvy lawyer draw up the contract. I’m sure you and your mum trust each other, but you will need that contract in order to refinance down the road.

    Keep smiling
    Felicity 8-)

    Profile photo of AdministratorAdministrator
    Join Date: 2013
    Post Count: 3,225

    In your particular situation I cannot quite see why you would make it so complicated.

    If your mother simply borrows some money against her house and lends this to you to assist with the deposit then you will avoid stampduty having to be paid twice. Once when your mother buys, and again when the property is transferred to your name.

    If you are a first homebuyer there may even be no (or a lot less) stampduty involved and you will at least avoid the stampduty otherwise payable by your mother by leaving your mother out of the picture.

    It would however be a good idea for your mother to have a proper mortgage arrangement drawn up so she is protected (remember, anything can happen).

    After all, it is only fair for your mother to be protected. You wouldn’t want it any other way anyway would you now ?

    If you and your husband are entitled to the
    $ 7,000 government grant it means that you really have already got a deposit of $ 15,500 to start off with.



    Profile photo of AceyduceyAceyducey
    Join Date: 2003
    Post Count: 651

    Per the other responses, number 1 make sure you do it all legally and properly.

    It protects all of you against potential future issues, family breakdowns & the like.

    Prevention is the best cure!



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