Joint vs Single name on Home Loan.

Could someone confirm if this is true.
If I'm married and my wife is not working.

I apply for a loan just under my name, it seems that I could borrow more compare to having joint names on a loan application with my wife.

Is this true?

Thanks.

 

It makes no difference to your affordability by having a joint loan or it in one name only.

You're requried to disclose your immediate family structure on the application, in your case you're married. The cost of living expense component will be the the same if you're both on the application or only one of you.

 

I read that it is preferable to have single title & single name mortgage rather than joint title & joint name mortgage. As I understand it, for example where a married couple has 50-50 joint title and takes up the mortgage on jointly, the lender will assess each borrower on his/her ability to repay 100% of the loan (rather than 50%). So this means that when the couple buys a second property, they will be assessed against 4 borrowings (2 of 100% of the 1st property borrowings and 2 of 100% of the 2nd property borrowings), rather than 2 borrowings. This will significantly deplete the couple's borrowing and servicing capacity. Correct me if I'm wrong here?

 

It's only if they borrow together than go off and buy individually that there will be issues. If they continue to buy together it's fine.

 

Thanks Jess. What if the reverse is true? For example, before the couple met, each individual purchased a property. Then they got married and bought a new property jointly (on title and on mortgage). All subsequent purchases/borrowings are jointly made. Any issues here on future borrowing ability/servicing capacity?

If none, then what if one day, after buying their jointly owned property, one of them decides to refinance the very first property that he/she purchased on his/her own (eg. to get a better rate/deal from another lender)? Any negative impact here?

 

You would probably need to then put the other partner on the loan as either a borrower or guarantor. You could also put them on title. This isnt mandatory and can involve stamp duty and CGT implications.

 

Yep, as Tobe says you'd just put them on the loan too if it was required for servicing. It's perfectly fine for a married couple to have one name on the title and two on the loan.

 

I guess the problem with having one on title and two on loan, is that only the person on the title can claim tax deductions (only at proportionate share, say 50% if that is the ownership percentage) if the property is an investment property, which will be highly likely for couples acquiring several properties over their lifetime.

 

You're right, but it's not necessarily a problem. You just put whoever makes sense on the title.

 

The ATO accepts that the person on the title can claim 100% of the interest deductions even where there are multiple people on the loan (e.g. the legal owner's spouse) for servicing requirements.

 

See my tax tips on this

 

Single ownership also get 2 land tax thresholds one each. Very useful in the long run if you tend to hold for a long time.

 

Really, is it as clear from ATO as black & white?

Example: Spouse A (high earner) & B (low earner) buys PPOR for 500K. Only Spouse A name is on title & both names on loan. few years down the track once equity is bulit loan in question gets refinanced in same structure (i.e. Spouse A on title both on loan) to release equity. Lets assume 100K equity is released. So new 100K loan is in both names Spouse A & B.

Assuming 100K is used to invest in managed funds held by spouse A, are you suggesting entire 100K will be deductible in Spouse A's name only ??

 

Yes. Spouse A on title to shares so only A could claim interest

 

So in that case you don't require related party agreement between spouse A & B where spouse B says he is ok with spouse A to invest 100K of equity release in shares....remember both spouse A & B are on the loan of 100K split.

 

I dont think you would need one from a tax point of view if both are on the loan.

 

on the second thought, related loan party agreement not require here cause underlying PPOR is in structure of spouse A on title and both on loan....practically single ownership

However if the case here was joint ownership i.e. both spouses on title and loan then related party agreement required among them...so one can use the split to invest

 

A written loan agreement wont be required as the owner is the one borrowing. If the non owner is the borrower then a written loan agreement is advisable

 

Which state is this applicable for ?

 

Most