Financing Australian Loan while overseas

@Rolf Latham
Apologies for the constant silly questions, but just trying to get through my thick skull.

But this is how I understood it.


Repatriate would require the new lender to payout the old lender directly right?
Where as cashout would result in funds being paid the person, and the person then paying the old lender.

(This is assuming the new lender is even willing to do a cashout at such a high level knowing there is an existing debt in place).

 

The issue you have is they simply do not service the loan. If they got a loan from their parents but declared it as a gift then they are lying on their application. But this is not a small little lie it's a massive 400k servicing shortfall lie.

I am all for creative thinking but saying such a massive loan is a gift when it is not should be reason enough to not want to buy.

Secondary to that though, if it was my sibling I would greatly question why they would buy in the most overheated market in Australia when they don't have immediate plans to move back? Why not just buy when they move home earning Aussie dollars when it is very very very likely some steam would be out and this 1mil property is likely 10% cheaper?

 

@albanga - They are unable to service the loan due to the heavy discounting on foreign income.

When I've modelled the numbers through various scenarios, they do work.

As for writing down a lump sum loan from my parents as a gift, its not something I want, but rather, what the lenders require if she wants to borrow from the banks.

I've told my sister to wait, but she is keen to buy as she does want to move back to AU and would like a place here before she moves back.

 

Apologies. I meant cash out as a lending policy term. At settlement the funds would be paid to the olds directly. Repaying the bank of mum and dad isn't a proscribed purpose is what I was getting at.

 

I would look to ANZ. Had a similar scenario that fitted with them but not others.

 

The parents are a lender, so they are just refinancing one loan with another. If properly documented and on arms length terms it will not change deductibility of interest.

 

I deal with these sorts of scenarios all the time.



Option A – what you have said is not necessarily the case. I got a loan approved recently where there was a private loan from the parents. The lender agreed to disregard this loan for servicing with the parent providing a stat decl saying they would not require any payments on the loan.



Option B is the easiest way to proceed. By the time the loan is refinanced the property will hopefully have increased in value so it would no longer be 100% LVR. Banks do refinance private loans all the time, and I recently did one of these as well.



Option C could also be an option with the parents owning a small percentage of the property – say 10%. Not ideal, but they could later sell their share back to your sister for minimal duty and CGT.



Gifts can also be converted into loans by giving the money back and reborrowing it. But there could be tax implications.

 

If she buys it as an IP and then makes it a PPOR she will probably lose a major CGT benefit (being able to rent for 6 years at a time and still not pay CGT when selling).