Servicing/income guarantee

Have been doing a bit of brainstorming (also reading a few american BiggerPockets books) and wanted to put forward the following scenario in the Australian lending market:

Scenario:
- Person A has 20% deposit + closing costs for a $1mil property.

- But Person A does not have the serviceability for another 800k of loans due to other outstanding investment debt.

- Person A's parent has no debt and good serviceability.

Q1:
Are there lenders that would allow only person A on the title, but loan the 800k to:
a) Person A's parent?
b) Person A and Person A's parent?
c) a company as trustee for a trust consisting of Person A and Person A's parent?


Q2:
If yes to Q1, if Person A increases income eventually to be able to service the loan independently, could a lender alter the loan to just Person A?

 

Thanks Rolf,

Would 1C scenario potentially get a green light to satisfy the "financial benefit" test initially, then down the track could potentially alter the trust directors and beneficiaries?

 

1 b and 1 c would be possible

2. Depends on how it was structured. If company borrower change directors and refinance with new personal guarantee.

 

What could be the benefit under scenario 1B?
And I don’t think “so I can get my child out my house” will qualify

 

Sorry I misread it. If the parent isn't on title unlikely to find a residential lender willing to let a parent be a co-borrower or an income guarantor.

 

So the only way this could work is have everyone on title with a strong exit strategy for the parents (if they have a large superannuation balance for example) and would still depend on the age of the parents, if they're over 70 it is tougher.
This may or may not work depending on the overall borrowing capacity, as all existing debts from Person A will need to be considered in the serviceability calculations.

 

There is the bare trust arrangement - which would allow changing legal ownership without duty or CGT. But....

 

ANZ has a servicing guarantee policy. It's strict and from memory I can't remember whether it was only for PPR purposes.

Let me know if you want me to find out some more info

 

For parental/step-parent servicing guarantees:
• The borrower must be in a position to meet at least 60% of the loan repayments from income that does not include indirect income from the guarantor.
• The guarantor must complete a Statement of Position, and it must be determined that the guarantor has the capacity to meet the loan repayments without substantial hardship. This must be verified. Relevant income evidence must be collected and assessed.
• The parent/step parent guarantor must be wealthy and sophisticated. A guarantor is deemed to be “wealthy and sophisticated” if they meet the following criteria: - A gross annual income of at least $250,000; or - Net tangible assets of at least $2.5 million.

Hope that helps

 

Thank you to the brains trust above!

I get what a company NTA is, but for an individual would ANZ include super in the parents NTA calc for the $2.5? (e.g. 1.6m home & 1m super = pass)

 

I believe Super might fall under Fixed Tangible Assets and therefore be excluded in the total, I will confirm

 

Doesn't Bank of melboue and Westpac guarantors don't have the servicing requirements as long as they have equity and must be used 80%lvr