Loan Tip: How to Have Joint Ownership But Separate Loans

It is possible for 2 persons to jointly own a property but have separate loans so that they are not jointly and severally liable for the debt.

But they will need to borrow in a way that doesn’t require a mortgage over the jointly owned property.



Example

Homer and Doug are mates from the pub and want to buy a block of land to build a duplex. They want it structured in a way that won’t make them liable for each others debts.

The land and project will cost $800,000

Homer goes and borrowed $400,000 against his main residence

Doug goes and borrows $400,000 from his mum.

They each have separate loans and each can use these borrowed funds for their project.

They have borrowed without mortgaging the jointly owned property.

Once the project is finished they can separate titles and Doug could own Lot B and Homer Lot A. Doug could then mortgage Lot B, without Homer’s involvement, and borrow $400,000 to pay back his mum.

Homer could do something similar, but he feels no need to at the moment.

 

Would their loans be deductible if the land and project is for investment purposes?

 

The interest on the loans could be.