All Topics / Help Needed! / acessing someone elses equity.

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of jasandlivjasandliv
    Participant
    @jasandliv
    Join Date: 2008
    Post Count: 39

    I want to combine my borrowing power with the equity in my mums home. I'm not on the title of her property. How do i utilise her equity to use as a deposit for an IP loan in my name? Mums keen. She has a small mortgage (20% of property value) but i will be seeking a suitable finance product through a broker. How best to do this?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Jas

    There are a couple of way this can be done but more importantly can i ask you why you need to do it.

    Assuming you are working and have a taxable income you will also have rent from the property you are looking to purchase.
    Is it a matter of having other liabilities than reduce your borrowing capacity ?

    As i say there are a couple of ways to increase your serviceability but without additional information it is difficult to provide you with a suitable response.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of jasandlivjasandliv
    Participant
    @jasandliv
    Join Date: 2008
    Post Count: 39

    Richard, Somehow i knew you'd be the man for the job. Options…?
    Mum has 40k remaining on a 260k ppor and low income.
    My sister and I both have investment properties but we want to utilise her available equity to improve her position for retirement. We will be using the equity in mums place as a deposit on property soon. Investment strategy will be either reno, duplex, subdivision,etc, not sure yet. Profit will be realised after a year. My sister and i will be fully responsible for the loan repayments for the project and mum will simply continue her repayments at the same rate she is now until we are able to pay off her mortgage entirely.
    How do we do this? Do we have to be on the deed of her property to use the equity for a loan between my sister and I? Can we take out a joint loan whilst protecting mum from any further repayments?
    Jas

    Profile photo of newbi2newbi2
    Member
    @newbi2
    Join Date: 2008
    Post Count: 227

    Hi Jas,

    The idea is noble and please dont take offence to what I am about to say. From your comment " Investment strategy will be either reno, duplex, subdivision,etc, not sure yet." I gather you are not experienced investors. Whilst your heart may be in the right place, and as you said, you and your sister will be responsible for the loan repayments, what happens to your Mum if things go south? As her property will be tied up with the investment (has to be if you are only using equity not redraw) she may end up in a worse case situation. If none of you are prepared to wear that, then please carefully consider tying up her property.

    I am not a broker but if you still wished to proceed – can your Mum redraw the amount required, you and your sister make up the repayments (ie maybe go guarentor as well) for the extra for her and use that for the project. The end interest should be the same, it would just isolate your Mums property so that if it did hit the fan, the most she would be out is the redraw rather than putting her home on the line. Sorry, just my 2cw, but when it comes to family I am EXTREMELY risk adverse.

    All teh best
    Mick

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    There are many things to consider including affecting her pension or future centrelink payments.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of BanjoSmythBanjoSmyth
    Participant
    @banjosmyth
    Join Date: 2007
    Post Count: 44

    Hi mate

    St George have a product called 'Family Pledge' Loan.

    You will need to look into the details but the basic deal is this.

    A family member who has equity in their property will go guarantor for the deposit on your new property.

    eg.  Lets say you wanted to buy a $300k property then your mum (in this case) would go guarantor for the $60k deposit that is needed to get a 80% loan. 

    This has 2 great features. 
    – Your mum is ONLY responsible for the $60k no more
    – The loan is in your name so you don't have to worry about interest calculations etc – you pay the entire loan (deposit and main loan).

    I obviously think that you should be Extremely careful if you are using other people money (or when spending your own for that matter)  but you Mum should be applauded for her generosity.

    Rich people stay rich rgeneration after generation becaues they
    1. teach their children how to manage money
    2. they help set their kids up by using the money that they already have.

    Best of Luck

    Cheers

    Banjo Smyth

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Jas

    Sorry dont want to be picky but we want to utilise her available equity to improve her position for retirement.

    This statement probably need more explanation that you may care to give on a public forum so feel free to email me if you need to. I am just trying to get a grasp on what the acquisition exercise needs to achieve as the resultant advice will be determined as often is the case by the eventual goal.

    From what i am thinking you want to do a Family Pledge loan would not be appropriate.

    Come back to me……

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of quickchickquickchick
    Member
    @quickchick
    Join Date: 2004
    Post Count: 168

    Hi Jas

    I applaud your sentiment, wanting to help your Mum out.

    But if things don't work out, can she afford to lose even the $60K suggested, and still keep her house?
    I'm not saying you won't succeed, but you have to be prepared to live with the risk.

    And so does your Mum.

    Not all property investors have success, we have done way better than if we had not invested.
    But friends of ours who have done investing (including developing) are in trouble at the moment, with their "empire" at risk due to 2 not-so-good investments.

    Part of investing has to be risk evaluation and management. Make sure you plan for every contingency, as something going wrong could break the family up….. which would cause your Mum more grief than having a thrify retirement, arguably.  

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