Personal loan for stamp duty? Already gone unconditional on the house with lending approved and can

Discussion in 'Property Finance' started by ChrisG, 2nd Jan, 2019.

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  1. ChrisG

    ChrisG Active Member

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    Hi all,

    We went unconditional on a house, bank has given final approval for mortgage and I just learnt that I will have to pay foreign acquirer duty on top of stamp duty - this gives us a shortfall of around $25,000 which we need to pay on settlement day. We are now 25k short on the funds to settle.... (the bank don't know this).

    My previous legal advice said I would not have to pay this as I am buying with an Australian citizen, it turns out that I will have to pay 7% on my share of the property and the previous advice was wrong. It is not possible to put the property only in her name, two solicitors have said it must be 50/50 (house only in her name would have avoided the foreign tax).

    Our income is around $350,000 per year before tax. We borrowed around 700k for the house. I believe this means we have borrowed significantly below what our maximum could have been.

    My plan is to take a personal loan to cover the extra we need for stamp duty. This is generally not a good idea for most people but our income is high enough (I think) for the $25k personal loan to not impact the serviceability of our mortgage enough for the bank to cancel on us. My main concerns are around getting approved by a lender (not the bank we are taking the mortgage from) and hoping the bank don't do another credit check before settlement day and see that we have new lending.

    I would just back out of the contract but being unconditional means we will lose everything we have already put in (5%) deposit plus this is a move from VIC to QLD and we've got no other housing options lined up (moving in 3 weeks).

    We won't have any problems repaying the 20 - 30k in a few months should we get approved.

    • Are the bank likely to find out about our extra lending before settlement? (The settlement period was long, it was 5 months and we're a few weeks away from settlement day now).

    • Would a lender approve 20 - 30k in lending to someone who is a few weeks away from settlement day?
    Yes, I'm stupid - any words of advice?
     
  2. ChrisG

    ChrisG Active Member

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    Also - we have 20k in credit card balance between us and a 10k car loan. No other borrowing.

    Our post - tax income is around 18k per month. One kid at private school (10k / year)
     
  3. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    Since this equates to $960 per day. Just save up for 26 days and you’ll have your $25K by settlement day. Put your other living expenses on a credit card for the month you are saving cash for.
     
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  4. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    1. not unless you tell them.
    2. generally it could be more difficult to qualify for the personal loan, but it is possible.

    You could sue your lawyer.
     
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  5. ChrisG

    ChrisG Active Member

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    As long as they don't do a credit check before settlement then I can't see how they would know, I thought they would run another credit check given that the settlement period was so long (5 months).
     
  6. ChrisG

    ChrisG Active Member

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    Save $960 per day? That's implying we have that coming in or would have otherwise gone out. Our cards are pretty much maxed out but we're not spending much at the moment anyway other than food, bills and cost of moving from VIC to QLD. I would say this probably isn't going to be an option.
     
  7. Cimbom

    Cimbom Well-Known Member

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    I think you will have no issue getting a loan for that amount on your income. Maybe get it for a bit less than the full stamp duty amount to minimise suspicions although I doubt the bank would check. If they did happen to ask, you could just say it's to buy furniture or something like that for the house. I'm just an internet random though so I could be wrong lol
     
  8. Joynz

    Joynz Well-Known Member

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    I am surprised - on that income - that you have maxed out your cards?

    It makes me wonder if you really can afford to repay a personal loan?
     
  9. ChrisG

    ChrisG Active Member

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    My partner is just returning from maternity leave so her income is coming back into play. We may have lived a lifestyle that cost a little too much but moving to the hinterland and being back on dual income should mean we can easily afford the repayments - the actual mortgage repayments are coming in at around $1400 cheaper than our rent on a month by month basis.

    Our real issue is cashflow rather than serviceability until a couple months after settlement (thanks to the unexpected $25k duty).
     
  10. tobe

    tobe Well-Known Member

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    It’s risky.
    Many lenders specifically deny borrowed funds as ‘deposit’. Paying for stamp duty counts as deposit.
    Further most personal loan lenders won’t do deposit as a purpose for a personal loan. They’d prefer to lend for furniture or holidays etc.

    No family/friends to hit up for a short term loan? Failing that I’d try increasing your existing credit card limit and taking a cash advance.

    Are you borrowing the maximum on the home loan? 95%? If not, can you rework the loan to account for the extra stamps?

    I can see how the mistake happened. In Vic spouses don’t need to pay the foreigner SD, but QLD do I think. Interesting to find out if they will refund it once she gets her PR. Worth investigating.
     
  11. Trainee

    Trainee Well-Known Member

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    Can the priperty be purchased 1/99? Does it have to be50/50?
     
  12. ChrisG

    ChrisG Active Member

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    No refund when you go PR unfortunately. If I extend my credit card limits I think my bank (who I am getting the mortgage from) will reassess the mortgage application.

    I'm more than happy to say the loan is for renovations with whichever lender we choose. This is just for the extra foreign duty rather than the whole stamp duty. Without this extra we'd be in the clear.

    When you include LMI, we're borrowing around 94.2% so no room to move there really.
     
  13. ChrisG

    ChrisG Active Member

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    Has to be 50/50 unless we get the vendor to scrap the existing contract, ask foreign investment review board for approval then put most of the title in my partners name. I'm not sure the vendor is willing to scrap our existing contract, the bank might not be happy with anything other than 'joint tenants' and FIRB may not even give approval as it's an existing dwelling.... sucks.
     
  14. tobe

    tobe Well-Known Member

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    Did you use a broker or bank direct? If it’s direct I’d arrange a confidential chat with the banker that wrote the loan. It’s their error as much as the conveyancer not to account for the extra stamps, they may be able to find a solution. There’s no guarantees or course, they could also pull the approval.

    The banks settlement team are going to see the extra stamps when settlement is booked. Settlement teams don’t usually speak to the credit team but it’s not unheard of. So it’s worthwhile having a quiet chat I reckon.
     
  15. ChrisG

    ChrisG Active Member

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    When is settlement booked; how far out from settlement day? Would this cause them to come back and re-look at the mortgage agreement if they realise our stamp duty is more than they expected?

    I'm not sure the bank would care where we get the extra 25k from would they? As long as we have a minimum 5% as genuine savings, the rest can come from anywhere?

    I went through a broker - for some reason he did not know about this extra duty....
     
  16. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    have you signed loan docs?
    sometimes the lenders ask has or will your financial circumstances change.
     
  17. ChrisG

    ChrisG Active Member

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    Correct - there are two clauses - one says that we will inform them of any future changes would would affect the assessment - the second one says we must inform them of anything that changes that could affect our ability to pay.

    For the second clause, I would have to say no, an extra loan of 20 - 30k won't affect us at all at our joint income level - the first clause I would have to say yes too and that will probably kill our loan or maybe they'll just recalculate and still say it's ok as our maximum borrowing capacity was around 1.6m and we only took around 700k.

    At this point, it might be better to lose the deposit we paid already and negotiate with the vendor to not sue us and try to back out - otherwise get a loan and don't tell the bank.. I've f-ed this up somewhat by not knowing about the foreign tax - pretty annoyed at the solicitor.
     
  18. ChrisG

    ChrisG Active Member

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    Half a bottle of wine later - I'm thinking from the banks perspective - they will see the extra stamps and they will see that the stamp duty plus foreigner tax has already been paid so why would they care to scrutinise how we paid for that as long as they see enough money to settle in my account?

    We could've taken a loan three months ago and saved most of it for three months and call it genuine savings for all they care!
     
  19. Danh NGUYEN

    Danh NGUYEN New Member

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    Sell the car?
     
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  20. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    If they discover that the money is borrowed via a personal loan, then they will halt settlement to reassess your suitability for the loan. The likelihood of the lender discovering how you get the money depends on the lender. Some do additional pre-settlement credit checks (most don't).