All Topics / Help Needed! / Split Loan Vs Joint Loan ??

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  • Profile photo of se7ense7en
    Participant
    @se7en
    Join Date: 2011
    Post Count: 54

    Hi,

    I have recently decided to buy a half share in a property and was looking for the best financing structure, the 2 goals I want to achieve from the setup are 1) maintain serviceability for future investment, 2) avoid any taxation issues. After speaking with a few professionals the below is what I have come out with:

    2 x loans for equal amounts, each loan in a single name with the other party as Guarantor for each other`s loan. Whilst we will not be jointly on each loan we would become contingently liable for each others half of the total loan, in addition to of course the 50% of the loan that is in each of our names.

    If either of us did default on each of our loans that we are directly responsible for the guarantor would potentially be called upon to meet the commitment of the 2nd half of the loan.

    Any comments on this would be greatly appreciated

    Thanks

    In terms of what would need to be stated on any future loan applications, lender applications generally only require a Statement of direct Assets and Liabilities – we would not need to state contingent liabilities and would maintain serviceability compared to a joint loan.

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    You are required to state any loans which you are providing a guarantor to still, as well as only factor in 50% of rent. This structure doesn’t resolve the serviceability issue.

    Other than that, quite a common setup you’ve mentioned for these scenarios.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Walking to run
    Participant
    @alisdair-horgen
    Join Date: 2014
    Post Count: 68

    Terryw on this forum will probably have the answer for this but it sounds like an issue for future loans

    Let’s say it’s $400,000 loan. You’ll be seen to be responsible for $400,000 with only $200,000 equity. Sounds to me like you’ll have more trouble getting future loans. You can get an agreement where the loan doesn’t show it but you both own and owe 50/50 through a solicitor I believe but using the guarantor idea doesn’t seem to me to have much benefit than a normal joint loan.

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

    Yes guarantees generally count as loans for serviceability purposes.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

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

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