First Property & Future Borrowing Capacity

Hi,

My first property, a Sydney OTP apartment , is soon to be complete and my wife and I will both be on the title - as we submitted the Stamp Duty forms (some time ago) as a 50/50 share.

As we will soon be looking to arrange finance, my latest thoughts were that it may be best to get this loan in my Wife's name only - however I'm not sure if this is possible with both names on the title?

The thinking behind having this loan in only my wife's name only is that this apartment will become an IP (in a year or so) and we will then be looking for a PPoR, requiring a much higher loan amount - so I want to try and maximise my borrowing capacity for the future PPoR (as I am the higher income earner).

I realise that our maximum borrowing capacity for the future PPoR would be when both of our incomes are considered on the loan - however the risk I'm trying to mitigate is where my wife may be on maternity leave during this time and my borrowing capacity is reduced by having my name on the loan for the IP.

 

Have you had your borrowing capacity checked? It may not be an issue either way.

You will need to be on the OTP loan in some capacity - either as borrower or guarantor.

 

Hiya

You'll both need to be on the loan app due to title ownership

Cheers

Jamie

 

Further to what Jamie said, the name on the loan doesn't determine tax deductibility. It's generally who's on title (who actually owns the property) that determines where the tax implications go.

There are some exceptions to this, so seek advice from your accountant.

 

Thanks for the responses, that helps clarify that we will both need to be on the loan.

Haven't checked our borrowing capacity yet, but we'll need to apply for pre-approval soon - with the expected settlement mid-late Feb.

Hopefully we can lock in an Owner Occupied IO loan, although I have read that most banks would be looking to have this as P&I.

 

It is getting tougher to get IO OO loans, lenders usually want to see a very good reason for this & may offer a shortened IO term. Your LVR may also restrict you if its above 80.

May want to have a quick chat with your developer and see if your OTP is ready for full vals. If settlement is next month, this will usually happen around now. It means you can apply for a full approval, rather than just a pre-approval now & have it done in one go.

 

This doesn't mean you have to settle the property that way.

 

We did question this via our Solicitor and their feedback was: that any change to the ownership structure at settlement, in contrast to the 50/50 split on the Stamp Duty forms (submitted 15 months after we signed the Contract), would be considered by the OSR as a separate transaction in regards to Stamp Duty purposes.

On this basis I'd have to pay an equivalent 50% share of the SD costs to achieve this so would not likely to be worth it for us to do this.

 

Yeah, it's unfortunate for us that they are cracking down on this - as we could save over $10k in the first year, straight into the offset, due to the lower IO repayments versus the equivalent P&I rate. So this would be our main reason, to generate as much extra savings as we can towards a larger PPoR loan in the near future.

Thanks for the suggestion of an early val and the option to jump pre-approval stage - I'll research more on this and make some enquiries.

 

Lol. You should ask him the next question - how much is the duty? Possibly $10 or $50
s 18 Duties act
DUTIES ACT 1997 - SECT 18 No double duty

 

Thanks Terry, I'll run this by them to find out what the cost would actually be.

Appreciate all your contributions on here - I've learnt so much off your posts, but still a lot to go.

 

If they say it can't be done just ring up the OSR and ask.

 

I spoke with OSR and their General advice was that it would be a Section 18(3) transfer "not in conformity" and would be $10 to revert back to a single name (provided we were both married at the time of the Contract).

The interesting thing was they indicated we could always make a similar transfer (or revert back to 50/50) later on after settlement, provided it is our PPoR.

 

Yes this is true and it can be a strategy used to increase deductible interest when moving out and renting it.

BTW did you lawyer know this?