Joint or single loans

I’m a 35 year old professional looking to buy my first property as a PPOR. Have already saved up over 20% deposit. Two months ago I got preapproval for a loan to get an idea of what I can afford. Since then I’ve become more interested in the idea of buying with my partner, who unlike me, has no savings and works a minimum wage job, and who is currently weighing up his options to determine if he should buy with me.

We asked the bank if we could get seperate mortgages to buy a place together, and if so, how much he could borrow. We don’t want a joint mortgage for a number of reasons (the relationship is somewhat new, we want to keep a bulk of our finances seperate, we don’t want a joint account etc). We’d prefer to borrow separately and be each other’s guarantors. The bank’s now saying that if we buy a property together, even with seperate loans, I can borrow more than double of what they preapproved me to as an individual applicant. They’ve also said that he could borrow significantly more than what he could as a single homebuyer.

We’re very confused. I thought preapproval was all about determining how much someone can afford to repay, so why does buying a property with someone else dramatically increase my borrowing power even though my salary, bank balance and credit history is the same?

 

2 incomes!

 

But his income doesn’t change what I can afford to pay. My income doesn’t change what he can afford to pay. If I lose my job he won’t be magically able to double his salary to cover my share of the repayments.

 

In this case maybe better off to either buy as tenants in common or just buy under your name and he pays you a boarding fee. This way your finances will be slightly more seperate incase of the relationship doesn't workout down the track.

 

You are jointly liable for the debt. so 1 + 1 = 3

 

What would be the benefit of TIC for a de facto couple? Aren’t the main benefits of TIC to do with who inherits the share if one person dies? We’d put each other in the other person’s will to inherit assets and property anyway, so being TIC seems redundant but maybe I don’t know enough about it.

What happens if one party of the TIC can’t repay their share of the mortgage?

Also, how does the family court view TIC? what happens if a de facto couple buy as TIC with a share of 70/30, then they seperate years later and need to settle their financial affairs? Can one party go to family court for more than the share they owned as a TIC, for example can a TIC be granted 50% by a family court even though their share of the property was 30%?

 

Is buying a property together when the relationship is still new a good idea?

The fact is buying together, separate loans or not, binds your finances. One cant pay the other is responsible, or the bank sells the property.

Is there a deeper mismatch of money habits? Is this going to be a problem later on? Does your partner feel like he has to change his habits and start saving? Can he?

 

@jinx77 who's the loan through? Are they actually doing individual loans w/ guarantor each other.
Or have they simply does two separate JOINT loans?
CBA is great in this space 'property share'
Broker told me last week that he thought this product was pulled for brokers?
Not sure but know it still exists direct.

 

Yes of course. The legal ownership on the title means little in family law terms.

 

TIC or JT also doen't matter for family law disputes, but a JT has to be converted to TIC if one were to buy out the other, and you might end up separated but continuing to owe the property so you could will your share to someone else..

 

If you don't want to be responsible for your partner's debt, or equally importantly, they can't repay yours if you can't work, you need to rethink - make sure that you have adequate insurances in place to protect each other.

Buying property together WILL bind your finances - going guarantor doesn't change this. Their loan will be yours, and vice-versa, if you don't want to lose the house in the event one of you can't (or won't) pay.

 

I don't believe that's fully the case. Don't believe if the other party defaults and the security property is repossessed that default is only lodged with the party who defaulted - not both. But 100% the property is always at risk, it is a security guarantor after all.
I'm aware some banks take a guarantor into account for servicing, not exactly sure why when it's a security guarantor - I know that there are banks that definitely don't.

 

The only way to not be liable for the other person's debt is to borrow separately with security being other property and then each of you jointly purchase the property, but keeping it unencumbered.
Not easy in the early stages of life, but you could potentially borrow from family.

 

Wanting to keep things simple just doesnt work here. You need to understand all the implications and how the bank sees things.

 

Yes - I meant in terms of keeping the house, not defaults being lodged.

 

My understanding of TIC is that if there are any legal issues down the track, TIC will be easier to identify who gets how much. Some people use TIC for tax perspective.

But like some of the above mentioned, that the family court still grant 50% even if it was split unevenly to start with.

If you are the main income earner and you have doubts if your partner can repay the loan, why don't you do a prenup and buy the property solely under your name? So you are 100% covered. And your partner just pay you a boarding fee. It might be a bit confronting for your partner but this seems to solve your concern?

 

No basis for that statement. JT or TIC won't really change things in terms of tracking things. the property could be in one name, JT, TIC or neither and still be subject to the same laws allowing the courts to rearrange ownership.