Is it possible to do 'one on loan two on title' property share loan?

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Nelly
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Is it possible to do 'one on loan two on title' property share loan?

Postby Nelly » Tue Jul 16, 2019 6:07 pm

Hi, I’m looking to purchase an investment property with my brother as a tenancy in common. Basically, it would be a property share loan with both of us on the title. I will be contributing $75K towards the purchase and my sibling will be contributing $225K towards the purchase and I will take out a loan of $300K to complete the transaction. The property share will be 37.5%: 62.5% as per our contribution. Is it possible to do so with one on the title but not on the loan application?

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Otto Dargan
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Re: Is it possible to do 'one on loan two on title' property share loan?

Postby Otto Dargan » Tue Jul 16, 2019 9:43 pm

Hello Nelly. Welcome to the forums.

You can have your brother as guarantor and you as a borrower with a property share loan with some of our lenders on a case by case basis.
Either way, your brother as a borrower or a guarantor is still liable for the debt so legally speaking he is not in any better or worse situation. Think of it this way, if you were to default on the loan then the bank cannot just sell your part of the house! They would have to sell the entire thing.

The bank would require him to get legal advice. Basically, if your brother trusts you then it should be fine.

You have two options. If you want to be one as the borrower and one as guarantor then you can qualify but your lender options are limited. If you are both ok with being borrowers and just agreeing between yourselves that the loan is for both of you then this is the better way to do it and you can apply with any lender and get a better rate.



We specialise in co-investment loans and can usually find you a solution that fits your needs. The key is to apply with the right lender.

Give us a call on 1300 889 743 or fill in our free assessment form to find a loan that best suits your needs.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Nelly
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Joined: Tue Jul 16, 2019 6:05 pm

Re: Is it possible to do 'one on loan two on title' property share loan?

Postby Nelly » Tue Jul 16, 2019 10:02 pm

The problem is my brother doesn’t want a loan commitment, so most probably property share will not be an option. So, looking at the other option of him being a guarantor and being on the title, how does that work?

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Otto Dargan
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Re: Is it possible to do 'one on loan two on title' property share loan?

Postby Otto Dargan » Tue Jul 16, 2019 10:30 pm

Hi Nelly,

Basically, with a security guarantee:
  • Your brother will be a guarantor and not a borrower.
  • This will be your loan.
  • Guarantor (your brother) is still liable for the loan. This is because the bank cannot sell half a property if someone defaults. So all owners must be either a borrower or a guarantor.
  • In the event that the loan defaults then they would need to sell the property and your brother would get less money as his loan has to be paid out.
  • The lender would require your brother (guarantor) to get legal advice.

The security guarantor (your brother) will also be required to send his financial documents.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Nelly
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Joined: Tue Jul 16, 2019 6:05 pm

Re: Is it possible to do 'one on loan two on title' property share loan?

Postby Nelly » Tue Jul 16, 2019 10:39 pm

Cool. So, what sort of considerations do we need to discuss with our legal adviser? Do we need to get it in writing?

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Otto Dargan
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Re: Is it possible to do 'one on loan two on title' property share loan?

Postby Otto Dargan » Tue Jul 16, 2019 10:59 pm

Hi Nelly,

Yes, you absolutely need to get a co-ownership agreement in writing. It could save both of you from all sorts of dispute down the line. We recommend you speak with a qualified solicitor regarding this.

We’ve listed some questions best discussed with your solicitor/legal adviser, such as what happens when one party:
  • Managing the unplanned: Defaults on the loan? Becomes ill or unemployed? Moves interstate or overseas?
  • Property sale: How long will the property be kept? How will any capital gains or losses be split? Can one party buy the other party out?
  • Property ownership: How will the ownership of the property be split?
  • Maintaining the property: If you intend to let the property, who will manage it and collect the rents? What happens if you cannot find a tenant for the property? What happens if the property is damaged or cannot be occupied?
  • Recording the agreement: How will the agreement be recorded? Should there be a formal agreement drawn up to cover these and other considerations?
  • Insurance: In addition to mandatory Building Insurance, what other insurances to be considered? (e.g. contents insurance) Who is responsible for organising, paying for and renewing insurance policies?
  • Renovating: What kinds of renovations can be done to the property? Who will pay for the renovations?



Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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