Forums / Getting Technical / Legal & Accounting / 1 on mortgage 2 on title!

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  • Profile photo of BejacoBejaco
    Participant
    @propertybejaco-com-au
    Join Date: 2017
    Post Count: 2

    Hello!

    I bought a house a few years ago with a good friend. It is a good site as it has future development potential and has significantly increased in value.

    My friend now wants to buy another property but can’t service the loan because of the joint debt we have on the jointly owned property.

    As we both still want to develop the site in the future is there any way I can take over the full loan while he retains ownership in the property? I’d be happy to take over the entire loan and leave him on title. Is this possible? If so would it improve his serviceability?

    Many thanks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Yes, but..

    But you are conflating a ‘loan’ with a ‘mortgage’ when they are two separate things. A mortgage is a charge over a property to act as security for a loan. Since there are 2 owners there must be 2 mortgagors because banks will not let their loans be secured by part of a property.

    So to get the loan into 1 name, and secured by the property, the bank will require the other person to be on the mortgage and to guarantee the loan. Because if you don’t pay they will have to pay this does not really change serviceability at all.

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of BejacoBejaco
    Participant
    @propertybejaco-com-au
    Join Date: 2017
    Post Count: 2

    Thanks! Would transferring the property into a company or trust that we both control make any difference or would his serviceability still be impacted?

    Or, could the property be transferred into a trust controlled by myself and someone who acts on his behalf? We want to do this so we can continue to hold the property then develop the site in a few years.

    Cheers

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Yes it could make a huge difference. I started a thread on here about 6 months ago about this exact thing.

    Keep in mind any transfer would be a CGT event and a dutiable transaction.

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Here is the link to that thread I mentioned

    https://www.propertyinvesting.com/topic/5031860-trust-strategies-to-increase-borrowing-capacity/

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    A simpler solution might be your friend applying for a loan with a lender that will take into account only 50% of the loan on the existing. The lender will also accept only 50% of the rent but overall, this could work 👍😎

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

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

    Indeed – the best thing would be to confirm that there is definitely no option for finance with the current structure as there are options in the market which can only be applied through brokers (and not all brokers have access to these products).

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

    Investment Focused Finance Strategist - servicing Australia-wide

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