Joint vs Single name on Home Loan.

"You'rerequiredd to disclose your immediate family structure on the application, in your case you're married."

Is this true for all loans?
I was hoping for our PPOR loan and title to only be in my wife's name. If I have to disclose my details will this impact me for future borrowings for IPs?

 

Yes - lenders ask if you are married or defacto, but this is only to calculate estimated living expenses. It doesn't mean the spouse has to be on title or be on the loan. But it will effect future borrowings because the living expenses will be higher.

 

Yes you do need to disclose your current family structure. Being married, but only having one name on the title & loan, means one income and two living expenses.

This can be a pretty big detriment to borrowing capacity, and usually makes servicing loans quite difficult. Roughly $1000 per month in additional living expense costs factored in (depends on the lender, often the postcode), equating to ~$150k impact on individual loan serviceability.

In future, if you do continue to buy solo/lend solo - you'll need to deal with this impact on servicing.

Alternatively you can borrow jointly, but this usually leads to a path where all future loans are done this way too. Trying to go back to individual borrowings after a joint loan becomes even more difficult. Higher living expenses & the the joint debt will need to be included in full for the individual borrowing (while the full rental income may not be included with most lenders).

 

It is possible to buy in your own name without the partner and without the added living expense if you can show that the other partner is earning enough to cover their own expenses.

When you have kids, however, you do need to have them in the application as they are a joint liability

 

So consensus is max out in single names before going joint. In Property Title and borrowing capacity. Same as it ever was.

 

Well, preferably to maximise borrowing capacity for 99% of cases having joint borrowers for a household will maximise capacity and lender options as otherwise the lenders will effectively treat the non-listed party as an adult dependent, which can be the equivalent borrowing capacity drain of 4+ dependent children. There's no need to necessarily put both names on the title, it's possible to borrow jointly with a single name on title.

Theres a lot of competing factors in structuring - risk mitigation (legal), tax (which name to put properties under and borrowing capacity (lending). Balancing these factors is important, as in the end you still need to achieve your goals and if you go too far in one direction, it can prohibit yourself from getting anywhere near moving forward.

 

From a borrowing cap point of view my general view is that going single names on loans is better until you max out. Then going joint may squeeze a bit more capacity out.

But as Corey says borrowing cap is only one aspect to consider.

 

Thanks gents.

This is true. I'm across the finance side of things, relatively.

There is also the Land Tax factor to consider as part of your Ownership structure. 600k per individual (in Qld) exclusive of PPOR from my understanding. Whereas only 600k as a joint entity on Title? This brings forward Land Tax twice as fast, correct? Just starting down the road of partner name properties this year before having to go into Joint Ownership.

 

No. Each joint owner will only be liable for assessment on their share. A $1.2mil land value property could be exempt if owned as 50/50 tenants in common or Joint tenants.

 

How would that be done, show them the partners income and joint expenses?

 

It's more like 6 lots of 200k Land Value Investment, with a 400k PPOR Land Value.

 

There's a small number of lenders which will accept this if you show their payslip or the like.

This isn't a productive strategy however, as this reduces your lender pool from the entire market to <10, most of which not being all that crash hot at borrowing to investors with significant portfolios (read: those who need to eek out as much borrowing capacity as possible by reducing unnecessary barriers in borrowing calculators).

So you 'solve' one problem whilst taking on a conservative calculator. It's OK if you've already snookered yourself and it's the only way to squeeze one more property purchase, but it's not exactly great planning to rely on this and remove yourself from the most generous lenders in the market.

 

Hi Terry,
it will affect the future borrowings of both people I presume?

 

In future, if you do continue to buy solo/lend solo - you'll need to deal with this impact on servicing.

Alternatively you can borrow jointly, but this usually leads to a path where all future loans are done this way too. Trying to go back to individual borrowings after a joint loan becomes even more difficult. Higher living expenses & the the joint debt will need to be included in full for the individual borrowing (while the full rental income may not be included with most lenders).[/QUOTE]

Hi Redom,

maybe we should use less pronouns.
Applicant A (getting the loan and title)
Applicant B (the spouse not on title or loan)

"having one name on the title & loan, means one income and two living expenses... equating to ~$150k impact on individual loan serviceability."

For Applicant A I presume? Not for Applicant B's future borrowing?

"
In future, if you do continue to buy solo/lend solo - you'll need to deal with this impact on servicing. "
For Applicant B as well?

 

Thanks but then I'll be able to include their pocket money as earnings Woohoo!

 

Thanks Sonamic, yep.

 

Indeed, it's more a strategy when one spouse has significant credit issues/ defaults or lots of unrelated debt (they don't provide an A&L just a payslip and privacy consent).

 

Thanks Corey, sorry once again the pronouns are a bit confusing.

"The equivalent borrowing capacity drain of 4+ children." For whom? The original loan holder I presume, what about the non-listed party? Basically if Applicant A is maxed out by the loan for the PPOR and applicant B is free to obtain more finance with a strong income, shouldn't this be the best way? I can't imagine wanting to do some loan splits as being so advantageous unless applicant A is struggling to get finance on the first loan in the first place.

Like Terry says, is it not better to wait to squeeze the last out by going joint as a later option rather than an initial. It sounds to me its like pushing the proverbial uphill if joint loan is done early.

 

Yeah, more lenders being available would have to weigh in heavily as a consideration for most people I would think.

 

No it will only effect the borrowing cap of the spouse who is not an owner. the owner would be borrowing the same amount anyway.