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How would the loan work? Joint Venture purchase with a non-borrower

Discussion in 'Property Finance' started by dboy_tomato, 4th Aug, 2016.

  1. dboy_tomato

    dboy_tomato Well-Known Member

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    I am in the process of purchasing a property and I have a friend who is interested in partnering the purchase with me. But the problem, he is only investing the capital (say 20%) and wants just 20% of the share. With me borrowing the remaining 80% under my name.

    The question is, how would the bank see this? With say a tenant in common purchase with two names (me & my friend) but only one borrower?

    Would they allow it?

    If things do go belly up, will the bank only seek the 80% and not the 20% held by my friend?

    The reason why my friend won't borrow is because he is a foreign national and can't borrow at the moment in AU.

    Any advice would be great!
     
  2. The Y-man

    The Y-man Moderator Staff Member

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    "Can't borrow" or "Can't buy"? You could get yourself in FIRB trouble.


    The Y-man
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Two names on title would mean both has to give a mortgage.

    But one could borrow with the other giving a security guarantee.

    get some tax and legal advice.
     
    Perthguy likes this.
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You also need to consider the foreign investment rules.

    Another way to do this may be to borrow money from him - but again complex tax rules apply.
     
  5. dboy_tomato

    dboy_tomato Well-Known Member

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    Thanks Y-man & Terry, yes I am consulting my broker now and his comments were the same - that if the name is on the title then he needs to be on the loan...

    + the tax treatment is pretty complex if we need to structure it as a borrowed fund.

    still need to work it thru..
     
  6. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    @dboy_tomato;

    Do you need the capital injection from your friend to proceed?

    Can you "go it alone" without the 20% with a lesser deposit perhaps and pay some LMI?
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is not really correct. Loan could be in your name with him giving a guarantee.