- se7enParticipant@se7enJoin Date: 2011Post Count: 54
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
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.Corey BattParticipant@cjaysaJoin Date: 2012Post 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.Walking to runParticipant@alisdair-horgenJoin Date: 2014Post 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.TerrywParticipant@terrywJoin Date: 2001Post Count: 16,213