Loan to son to purchase PPOR

lodging a caveat may give you priority over later creditors. But keep in mind this is likely to be a breach of the terms of the first mortgage over the property.

b) prob not.

 

Is the equity mortgage done the way it is (not registered against the property title) because doing so would affect the first mortgage? So its just a fancy name for a unsecured loan.

So say there is a first mortgage, an unregistered equity mortgage, and the owner does a second mortgage with another lender.

The unregistered mortgage would rank third?

So an equity mortgage can be treated as a loan that must be repaid even if not registered (e.g. in a death or divorce situation), but will not rank above a registered mortgage even if that was taken out after the equity mortgage?

 

an equitable mortgage is a secured loan - it is just not registered.

Generally legal takes priority over equity and first in time takes priority over legal in time.

So a legal second mortgage will take priority over an equitable mortgage even if the equitable lodged first. but if the 2nd legal mortgagee knows about the equitable mortgage they can lose priority.

A mortgage is not a loan but a form of security. An equitable mortgage can be security for a loan.

 

No need to apologize or explain about your son's investing or journey. Many should understand that each journey is unique and personal but the main aim is to congratulate if it was successful to you.
Well done and thank you for your gratitude and keeping us posted!

 

Someone will tell me why I'm wrong but if I was you or your son - I'd want you to take ownership in the property to the extent of your contribution. With a provision in your will specifically addressing the matter.

 

That is an idea.

The issue though is that portion of the property would prob not qualify for the main residence exemption - if being used.

 

It’s really a nice thing you are thinking of doing for your son.

Just some food for thought... I have been the other partner in a situation similar to this, and it was a very uncomfortable situation for me.

My partners parents wanted to gift him a large sum of money (about $400k) so that we could buy a PPOR together. But they also wanted to have a clawback if we broke up so that I couldn’t take any of the money they contributed. My parents were not in a financial position to make any contribution to our PPOR, nor would I have been interested even if they could. To be clear I had no interest in taking his parents money if we broke up, however things escalated very quickly...

My partners father was a barrister. He considered various structures to protect their money, using trusts, second mortgage, caveats etc. which led to many uncomfortable conversations for me with his parents. I decided that I did not want to enter into any kind of property purchase with his parents as it was getting way too messy. I also felt like I was already being accused of taking something that wasn’t mine... even though I hadn’t.

I suggested to my partner that we purchase a property in relative proportion to our contributions (I.e 60/40) or wait until I could save a bigger deposit so that we didn’t need the parents money.. My partner didn’t want to miss out on the loan interest savings by having the much larger gift from the parents to use towards the purchase. It caused a lot of tension in our relationship because it became clear that we had some very different opinions on the issue. As adults I thought it might be good for us to try and make it on our own.. he couldn’t understand this at all...needless to say, it actually ended our relationship.

Perhaps think about another way you could contribute to your son without making his partner feel the way I felt. Could you set up a trust that he could earn income from. Or could you purchase an IP for him that has nothing to do with his partner. Or keep the money until children come along and then use the money for the grandkids or something. I can see your intentions are kind, but very few new couples would like the drama of bringing their future in-laws into their first property purchase..

 

Or can this situation be done the other way around? Property buy solely under son's name and his partner/defecto go the loan with him as joint borrower. She than lodge a 2nd mortgage or caveat over the property for a portion of the property to protect her part of the share?

 

Thank you Sumterrence, Trainee,MWI, Bunkai, Archaon, and the famous Terry-w for your comments.

And wow thank you Curious2019 for pouring your heart out in a long message.
1,/The property will be in son's name only. The potential purchase process was discussed before son met this lady so hope in someways it helps for the lady to see that it is not "about her" in particular. She is very nice and we love her dearly. It is just a process. For the son, it is something he would like to do (the loan document) to give us peace of mind. We are talking 2M+ gift here. He knows we have worked hard for it.
2./We have discussed funding for his kids education as well and it has been sorted.
3./No help from us re. his IPs. He can do them on his own.

 

As a general rule - never date a barrister. We have to extend this now to someone with barrister parents.

 

Hey if you mean son is a barrister then no, nor anything lawyer-related either

 

No, I was suggesting you encourage him to not date one.

 

Oh I see. Sorry I am a bit slow here. Why is that ?

 

Barristers are litigious, more so than solicitors. They hang around courts all day.

I once went to a specialist doctor and she seen I was a solicitor and she said you are not going to sue me are you. She didn't want to see me really. Just in case.

 

This is my experience too
Bank required a gifting not a loan.
Initially I suggested both parents gift a small sum of say $400k to the couple but they said no.
So brought the property unencumbered then placed a mortgage on the property.
Later when they wanted to purchase a more expensive property I gifted the $400k with a agreement (drafted by a solicitor ) . The bank required the gifting as they were taking a mortgage over both properties.

 

Don't let a bank dictate things like this. it can have far reaching consequences.

 

They had made no savings over the many years so they needed the property unencumbered to buy the next property.

 

Sorry, i don't understand.

 

Not surprised you do not understand ....it's all foreign to us! (No savings :-( after many years)
Even with no interest cost my daughter and her husband saved pretty well nothing so to "upgrade " the house they needed to borrow from the "gifted" house.

 

Haha yes, he was an investment banker and I an accountant.. luckily I could understand what was going on and knew to stay out of it!