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Loan in two names but property in one name only. possible?

Discussion in 'Accounting & Tax' started by Ravi, 17th Mar, 2016.

  1. Ravi

    Ravi Active Member

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    Hi,

    My bank has approved me a loan for an IP with me and wife as joint applicant. I may be able settle property in single title(As this is preferred over joint title).

    I do not have time to re-do loan as settlement is due shortly.

    Questions:
    1. Is it possible to leave loan application as it is (ie. joint account) while settle property in single title?
    2. If 1. is possible then will there be a problem in future? What steps should I take to convert loan from joint to single name after property is settled?

    If not possible then I may have to delay settlement which will cost me penalty.

    Thanks
    Ravi
     
  2. JacM

    JacM VIC Buyer's Agent Business Member

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    Answering question 1;

    Yes, but check with your broker/bank because some banks will kick up a fuss about it and demand both names on title. Having two names on title you could go in joint names (50/50) or tenants in common at a different percentage split (eg 1/99)
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    1, Yes for spouses
    2. Yes potential problems could be:
    - reduced serviceability if the non owner wants to go on another loan down the track
    - asset protection - bank will pursue both of you if you cannot pay the loan
    - asset protection - creditors of the non owner could come after the property if she/he went bankrupt

    You could settle and then later remove the non owner from the loan. For tax reasons it may be wise to have a loan agreement between you and the non owner so that she borrows and onlends to you.
     
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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    JacM raises a good point - not all banks will allow one on title but 2 on the loan. I recently had a problem with AMP on this sort of thing.
     
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  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    As long as the couple are married or in a defact relationship, they can both be on the loan with only one on title.

    This is often done when a higher income earner is needed to demonstrate serviceability, but the property will be positively geared so they want it to be in the name of the lower income earner.
     
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  6. Perthguy

    Perthguy Well-Known Member

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    That's interesting because AMP let me do it:- 1 name on the title, 2 names on the loan but I had an issue with ING when I wanted to do the same thing.

    ING would not let us have 1 name on the title and 2 names on the loan.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I just did one with ING for an existing ownership, refinance with 99%/1% ownership and got it through, but INGs solicitors held up the file while ING confirmed it was OK. I have never tried 1 title with 2 on the loan with them.

    AMP may have let this the 2 on loan one on title through but they were uncomfortable because of the loan size and the clients decided to go jointly shortly after that so we never got to find out.
     
  8. larrylarry

    larrylarry Well-Known Member

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    All my IPs are 2 on loan, 1 on title. Asset protection. STG.
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    For better asset protection can u take off the non owner? Constructive trusts!
     
  10. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Terry you'll probalby find that many lenders see 99% / 1% as an interest of convinience, it's not a real equitable interest. I tried this with a son/mother application some time ago, they determined that Mum wasn't really interested in owning the IP, she was just there for servicing purposes. We had to amend ownership to 90% / 10% shares.
     
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  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Peter yeah there is not much point in owning 1% of anything. If its a purchase this can be fixed, if an existing it can still be fixed, but more costly and cumbersome.
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    A minor interest may assist a spouse to be financially involved in all dealings. Eg a drinker, gambler or spendthrift or a person who may lack good judgement.
     
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