Parental contribution structure

Morning all,

As some of you may be aware I am currently PPOR hunting with a budget up to 500k. I have a 20% deposit and funds for the associated purchase costs. I plan to buy this property, then pay down the loan to access the equity.

My parents are not impressed with the properties that are within my budget and would rather that I look at more expensive properties. In the near future my parents will be selling their home to move to their shack, however, they would like to have a base in the city so they can come and go when needed but not have to maintain two households.

Yesterday they proposed contributing funds to the purchase of my PPOR to allow me to purchase a bigger more comfortable home (including accommodation for themselves). This communal living arrangement could be very beneficial for the both of us.

We will be seeking legal advice about how to structure the situation as obviously my parents need to protect their contribution. However, I don't want it to inhibit my options with the property, I am concerned about how to structure this without inhibiting my borrowing power and ability to access equity.

I hope that is enough information for an initial brainstorm, I just want to get my head around how different structures may impact on borrowing power/equity release.

Cheers,

Littlefinger

 

Thank you,

Parents do not want to be on the title and will not be on the loan either. Though they will want to register their interest in the property somehow, maybe by way of a caveat or second mortgage (preferably not a second mortgage as that won't be great when i want to access equity).

I am really confused by all this

cheers

 

If it was me and my parents they would just give the cash and then take a caveat over the property.

It’s cheap and simple.

Problems will arise if life changes.

Oh wait. No this is a terrible idea. Don’t do this.

Blacky

 

Registered or registerable 2nd mortgages are better. Docs/structure also needs to ensure that your parents going under and a trustee or creditor getting ownership of the loan doesn't allow for an immediate call.

 

Loan with a mortgage is prob best.

Seek legal advice

 

The doc prep for this type of stuff is good - but rarely used. You are talking about family.

Getting the message across all affected family members, with respect, prior to the transaction happening so expectation management is done properly is more important IMHO. This helps to stop fights before they start.

 

The tax impact of their involvement will have a income tax or CGT impact. Whether you claim tax deductiins is one issue but their used of t he property affects CGT

There may also be legal risks for the parents

 

thank you for the brainstorming

 

How well do you get along? Only child?
Do you want to buy a house you like - based on what you can afford? Would you be happy with this as a starter? If yes - why complicate this?
OR maybe end up buying a house to suit your parents because they are dangling a carrot - and you may lose flexibility in your decision making down the track. Eg you want to sell and upgrade - but they like the house and don't want you to sell.
Maybe your parents could sell and keep the spare cash to rent nice hotels when they are down - if the places you are looking to buy are not suitable for them to stay in when visiting.

 

Cut the apron strings - and buy a house you can afford on your own.

In Tasmania, $500,000 should be enough to get something, surely

 

A larger debt will inhibit future borrowing capacity.

A chat with a mortgage broker and exchange of some basic information will help to determine how this will impact your short, medium and longer term goals.