Joint vs Single name on Home Loan.

Thanks Terry

So if applicant a makes $75000
And applicant b makes $150000

My feeling was applicant a should get the ppor and then applicant b should buy the ips.

Is this not so good?

 

Impossible to say based on those extremely brief facts!

 

The same restraint is for both the borrower at the time AND the other party when they go to borrow in the future.

As an example - if you borrow jointly a household living expense may be 3k, with joint income of 150k (say 75k each). Otherwise you can borrow in a single name, however the same 3k living expense will be attributed to that single borrower - making a far higher % of cost eating into borrowing capacity.

The simple fact is that if you borrow joint, the borrowing capacity WILL be higher than the sum of two members of a household borrowing separately, its a mathematical fact as lenders will effectively punish you in terms of living expenses if you do not have joint borrowers compared to borrowing individually as a couple.

 

Thanks Corey,

So then why is the common advice to not put the loan in both names? Is it different when it's for PPOR?

 

Common is like 95% of the rest of the people out there. You don't want to be a 95%er do you?

 

No one could ever advise on this without knowing full details and future plans.

I see what you mean but your looking at it purely from negative gearing purposes and being able to claim the deduction against the higher income earner. Makes sense at a very basic level but:

What happens if the property is CF+? It should be under the lower income earner.

What happens if it's NG now but in the next 3-4 years it will likely go positive?

What state are you in? States like VIC allow spousal transfers whereas others don't.

 

What happens if your spouse buys it and you divorce, she/he dies and leaves it to Albanga, she sells, she mortgages, etc

There are far reaching legal consequences to consider.

 

Terry's comment made laugh, always a good thing to do in the morning when you get to the office.

I'd challenge it's not all the common to suggest that unless the person suggesting it is not aware of how living expense calculations (particularly now with the HEM changes) are destroying anyone who attempts to go down that pathway. There can be specific niche or legal reasons not to borrow jointly, but for maximising borrowing capacity with a normal prime borrower type it will set you back far more than you gain by doing it seperately.

What is a lot more common is purchasing in a single name, borrowing jointly which can allow spouses to continue borrowing long term whilst spreading the asset ownership - but that comes down to specific advice on circumstances. (you'll see this happen a lot with partners where one is self employed in a potentially litigious profession, the other PAYG low risk - the PPOR goes into the low risk name)

 

Yes, that's true, but I thought just by being here we were in the top 1%, or is it the bottom 1%? Yes, there's no point keeping up with the Jones' they're already broke.

I like us not being like the rest, here's my financial secret; I don't own a car, I ride a bike. That my friends is the bedrock of a great ROI and low outgoings. I've gotta say I'm loving this thread, it's too much fun.

 

Thanks Corey, this makes some sense in terms of costs percentages. I was worried about joint and several liability when borrowing for the next property.

 

Thanks Albanga,

I apologise to everyone for my brief comment about a hypothetical financial situation. I will say though, Albanga that photo reminds me of "Toady" from Neighbours with whom I went to school, I keep thinking it's him.

Yes, I'm in the Garden State, the place to be apparently. I didn't realise I could transfer my spouse to someone else, I don't think she'll be pleased I hope she doesn't transfer me for that matter.

Good tips there, I am getting up to speed on the whole guarantor and title transfers now. I've had an investor mindset for a long time, now it's PPOR time it's a switch from rentvesting.

 

So that's why Albanga wanted me to transfer my spouse!

Yes, I suppose there are things to consider. Currently, I'm at the age where my parents should be retiring but can't afford to, so why the media focus on young people not saving their money?

Gotta get the investing game going, all the way I'll start with 10 student studios at 9 metres square off the plan. Kidding.

 

Thanks Corey, this explains it well. I was always focused on the borrowing capacity ignoring other issues. I thought that having a well paid job, and keeping IPs in my name was the way to go.

Also, I understand that banks have their own algorithm for HEM, and someone like Jacob Lund Fisker (google him) would defy calculations. So, yes, horses for courses. Not unlike diet and exercise, we are told do this, eat this, but new research is showing people react differently to different things.

 

Thanks to everyone for all of your help, organising the finance now, I'll keep you posted with the structure decision when it's done, just in case anyone else is interested in seeing the path I took.

 

If buying in single name in VIC, would you add Nominee Transferee for the purchase. This is the 1st time I have heard this term. Not sure what could be the pros and cons of having a Nominee Transferee.

 

This is something you should ask a converyancing lawyer (not conveyancer). It probably won't hurt to add it to the contract of sale, but there can be far reaching consequences for stamp duty and asset protection if someone is nominated.

 

Hi Terry, thanks for your quick response. "Far reaching consequences" in good sense or bad sense? I will have a chat with my solicitor soon.

 

Bad!
Could be double stamp duty for instance.

 

From all I know, if you

Thanks Terry.