This is kind of complicated…
My husband and I both work full time with a combined after tax income of ~$1400 per week (can vary unfortunately as husband is a tradie). He is considered self-employed even though he is working for an employer and in July will have 2 years of income returns to take to the bank. I have been employed on a 2 year contract at a fixed salary and am into my 5th month of employment.
So…
My husband's mother is selling her house and wants up to $300,000 for it (she has yet to settle on a price). We need to get a loan and sign a contract with her before the end of October (as I am having a baby then!) but we are willing to negotiate a long settlement period for her (6 months or thereabouts) so she can find a new residence.
The problem? The asking price is up to or beyond our repayment limit ($500>/week). Is it worth it to get boarders, and how will this affect our application to the bank? What kind of paperwork is involved?
Does anyone have any advice/suggestions on the viability of this goal?
Thanks!
HelenIf you are reasonably happy where you are now, there is no reason why you need to move in straight away; why not turn the house into an I.P for a while until you get yourself financial more secure?
You can rent out your home for up to 6 years without incurring any cap gains tax when or if you ever sell. The requirement is that you would need to move in for a period of time first, then move out and put in tenants.
As an I.P all the holding costs and the loan interest etc are tax deductible.
As a self-employed person your husband would probably be eligible for many of the Lo Doc or No Doc loans going around these days, but you would need to talk to an accountant and/or a good property savvy mortgage broker as well to set up the right loan structure for you.Hi Helen
If your mum-in-law doesn't need all the money now, why not put the following to her. You will pay the $300,000 asking price but you can't pay it all right now. Following is how you would structure the offer.
You will pay her 80% now, i.e. $240,000 and then pay off the rest over 5 years. You achieve this as follows:
1. Get an 80% LVR loc doc loan for $240,000 for say 7.5% over 30 years. This will cost you approximately $387 per week.
2. You get a solicitor to write up an unregistered second mortgage (secured by caveat) for $60,000 between you both, were you pay her $113 per week for 5 years. Then, at the end of five years you pay her the remainder of what's owing, i.e. $30,620.
This presupposes your property has increased in value sufficiently over five years to enable you to refinance and draw down the $30,620 you need to pay her out. Probably not a bad bet.
This gives your mum-in-law the selling price she wants and limits you weekly repayments to $500 per week. Good luck.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Helen,
Things you need to consider:
1) If your Mum in-law was to sell the property on the market, what would it be worth?
I’m not sure on the size of your deposit ….but here’s something to think about…You can look at setting up your loan as a favorable purchase….what this means is that some lenders will accept a purchase from a relative without a sale contract. They’ll have it valued, and will then lend up to the market value. For example if the property’s market value is 400K, then you could borrow 75% = 300K….this would eliminate the need to pay for lenders mortgage insurance and you’d only need to cover costs such as stamp duty/legal out of your pocket.
2) Your husband’s income isn’t an issue and either is yours if you've been in the same industry…you can look at low doc or full doc loan options…from what you’ve said you can service a 300K loan (that is if you don’t have any other large liabilities).
3) At 300K your repayments would be well under $500 per week….you can always consider fixing all or a large portion for piece of mind…there are great fixed rates around 7.15%
4) As you are having a baby soon, you may want to leave some cash aside to help (as a just in case)…you can always borrow a little more if need be and leave it sitting on the loan so you don’t pay any interest on it.
5) Depending on where you live, if you’re thinking about a boarder maybe you can consider a student….a friend of mine does this and it works really well
Feel free to phone or email me if you want to ask questions or looking for a broker to organise your loan.
Kind regards,B
Bianka DemetsHome Loan Advice Centre
The complete home loan service
m: 0420 283 804 (mobile)
e: [email protected]
Vendor Finance Advice
Free serviceHi Helen without more information it is hard to tell however from what I read we have a lender that may accept your husbands position as a Payg rather than going the Low Doc way. Let me know if you would like to discuss this option further via email as not always here on this site
I was considering the fixed interest option for the first few years of the loan. What are the disadvantages with this?
Also, my mother-in-law's property is worth about $20,000 more than what we are paying for it. Are we able to use the difference between market value and agreed purchase price as a sort of deposit?
I'm not sure what Payg is…
Sorry, I am only just learning the ins and outs of finance. It's a mine field!
Hi Helen,
You could borrow the full 100% of market value….you would need to ensure that it is worth the extra 20K however.
Thanks, Bianka
Bianka
Home Loan Advice Centre
The complete home loan service
m: 0420 283 804 (mobile)
Vendor Finance Advice
Free service
You must be logged in to reply to this topic. If you don't have an account, you can register here.
