Buying in one name but borrowing in 2 names

What happens if you want to buy an IP in one name as opposed to jointly (with wife), but you have a servicability issue. That is, you want to buy in one name to take advantage of the person with the highest marginal tax rate (negative gearing) and to take advantage of getting 2 land tax thresholds (ie. buy this property in my name, and next property in my wife’s name). But from a loan servicability perspective, it is best I borrow in both names. As all IPs bought to date have been in joint names, if I now borrow in my name only, bank takes 1/2 the rental (+ shading), but 100% of the loan obligation (as wife and I jointly liable) - Right? If this is case, I have servicability problem, so need loan to be in both names.

So, how do I fix this. Can I purchase in my own name, but borrow in joint names?

 

Yes, as long as the other party is your mrs, mr or de facto partner.

 

I have a tax tip on this too. Expenses and income to the legal owner generally.

 

Yes, I think I read your tip Terry, which prompted me to indeed consider approach of IPs in one name. Getting 2 land thresholds very beneficial (I buy one, wife buys one). But can you borrow jointly if in 1 name. Appears the banks let you do that I am told.

 

I have only ever had one bank push back and that was for a main residence purchase and the lender was AMP. On the legal side i generally encourage people not to own jointly so I have many clients with one on title but 2 on the loan (only where necessary for servicing).

I haven't had any issues refinancing like Rolf says, even had one refinance to AMP and owner was non-working wife but both on the loan.

 

Thanks Terry and Rolf,

If you borrow in a single name, to assess servicability, I assume lender takes 50% of rent for jointly owned property but 100% of the mortgages on jointly owned property? (I am talking about all existing mortgages here). I know on some credit card applications, they just take 50/50 on both, but thought mortgages are different. If they take 50% rent, but 100% borrowings, it pretty much rules out borrowing in 1 name.

 

In other words, if you have substantial jointly owned property, very hard (impossible) in future to now borrow in own name.

 

There are a handful that will take your share of the joint debt based on ownership, but generally you are correct.

 

That is generally the case for the immediate future.

 

Once the house is unencumbered, this would no longer be an issue? (Other than land tax threshold)

Also, could you not take advantage of spouse txf cgt exemption, or is the concern that the bank would need to refi?

 

What do you mean?

Changing titles means new loans are needed if the property is to be used as security

If unencumbered it doesn't mean there is not loan associated with the property. The owners could have borrowed against other property for it so interest would still be deductible, generally, in proportion to ownership.

There are also estate planning aspects to consider, especially on the death of the owner of one of the owners.