[NSW]Looking for some advice around possible homeownership structure and loan structure

hey guys, I hope someone can give me bit more guidance around my issue. My situation is that me and my wife are living with our in-laws. We have a newly built granny flat at the back and we live in there while parents live at the main house.

Recently due to some personal circumstances (growing family) parents would like to move in to the granny flat so we could have the main house. However main house requires bit of renovation and also we are looking at addition a 1st floor extension with couple of rooms. Nothing too fancy but to provide some additional living space for the future.

We have been in contact with a loan broker and he has advised us that to get a loan approved for us to do the reno work we could put our names against the house 50-50 with the parents. They are ok with this idea and there is $100k outstanding on the current loan. What are our options here? would the parent be gifting us a 50% share of the house and we would pay stamp duty on the current property value? they don't want money from us. But the plan is to borrow money and pay off the current $100k outstanding debt and use some money towards the renovation work. I would appreciate if anyone can give me bit more guidance on how to do this the proper way as I'm not 100% sure. We are yet to approach a solicitor on this but wanted to know if we are doing things right first. We have never owned a home before or have no investment properties.

Appreciate your help on this situation.
Thank you.

 

Do you have savings? If not are you sure you can make the payments?

 

Yes we do have savings. Repayment won't be an issue as I have checked with the loan broker around loan affordability. I'm a little stuck around whole property ownership process. We are not looking to move out as my wife prefers to live with the in-laws as they are coming to about retirement soon in few years time.

Also we will be looking at staying here for awhile. So no plans to buy another PPOR or move out. May be an investment later down the track

 

The parents could be seriously impacted. If I were both of you (them and yourselves) I would be seeking legal advice on the idea. The parents could be disadvantaged with the Centrelink assets and incomes test and also gifting rules. There could also be estate issues if there are other siblings.

 

Thanks Paul@PFI for your reply. Yes we have checked with the centrelink and no impact to their current benefits. We are (all) meeting with a solicitor regarding this issue very shortly. I just wanted to get some clarifications from others here as to where other avenues we should consider or keep in mind when talking to the solicitor.

 

Do you have siblings?

 

Sorry forgot to answer that earlier. No siblings. Going forward parents will be living with us.

 

You may find a solicitor gives more warnings. This is one of those instances where the risks can well outweigh benefits and bite later and weigh on the independence of any adviser. The sort of story ACA love to show with a older parent punted from their home. A exchange of title for life tenancy is something that they should raise

 

Thanks for your reply Paul. Sorry if I was not clear above. We are not getting 100% ownership. We are only looking at 50% just so that it gives us the flexibility to borrow money to cover existing debt and do the renovation required for everyone's benefit. Plus we will be liable for going forward to pay the loan vs parents which is giving them bit of a breathing space for them as well. We don't have any intentions of punting anyone but I can understand where you are coming from given the stories we hear these days. But really appreciate your responses.

 

A common problem when older property and parents lack income to borrow. A bit of win-win eh ?

 

Sorry I'm not sure what you mean here. And not trying to debate as well . I suppose one can look at this a different way. I know that our (all involved) intentions are clear given all personal circumstances that had be considered

 

PoshG,

What's the property currently worth?

Regards,

Jason

 

you have to think about how this looks to a third party. You cant afford 100k to pay out the loan, and you dont have the money for the renovation.

and you are getting half a property for free. From the inlaws who dont sound well off and this is their only asset.

an objective person (and they may be completely wrong) might ask why the couple has few assets. Is this from bad financial habits that will be magnified if they have access to half a property? Will there be temptation to borrow more for a well deserved holiday or car? A business theyve been thinking about?

you paying the loan is fine, but if you ever become unable to pay, the whole house is sold.

you get the picture. There isnt any protection for the inlaws other than you would never deliberately do anything bad to them.

 

Similar properties around has been sold between $550k-$580k.

 

Dreadful advice from the broker.

 

I totally agree with you comment. I suppose it is given when you ask a random stranger online for advise . To answer your question, we do have savings and have invested outside property up until now. Our main investment has not been property so far.

Property is in a condition where it requires quite a bit of reno work which is about $100k according to few that we have seen already. So all up including transfer fees i would say it will be well over $250k to do the whole process. I suppose one could have that much savings aside but unfortunately we aren't up to that yet. Hence why we were thinking of borrowing money to do the job as we could handle the ongoing payments behalf of everyone. I hope that make sense.

 

No because you havent detailed the numbers, how much your investments are worth and its just your word that you can afford the payments.

Maybe you dont want to online, but thats what the solicitor should be asking when advising the inlaws. Maybe its just here where people over 30 would easily borrow 250k on their own.

Just smells unethical in this case where it is so risky for the inlaws. You guys get half the house for cheap, and you benefit from the reno. Sure your inlaws may enjoy having family live with them, but that doesnt mean its a good financial decision for them.

 

A solicitor would have difficulty giving independent advice to both parties. They would be obliged to scream NO at the parents while smiling at the adult kids and telling them how they got a great deal.

I often encounter tax clients who have agreed to transfer land between themselves. They find that the solicitor insists they only act for either the buyer or the seller. I wonder if conveyancers have that limit too ?

A lesson in this for onestop shop property spruiker firm clients. A non arms length broker, sale agent and wealth strategy adviser is a foolish thing.