Short term loan from family.

Hi, wondering if anyone can give advice or point me in the direction of where to understand the implications of receiving a loan from family.
Looking to borrow $200k from my in laws towards a deposit. To be repaid in whole within 12 months (after the sale of our property).

Side info, we are moving out of Sydney, want to hold on to our current PPR, while we rent in new location for 12months however we want to have the option to buy if the right home pops up within that 12 months (once we decide we want to stay) but half our deposit is tied up in our current PPR which we would sell soon after buying new home. just need that loan to make sure we don’t miss an opportunity. Alternate option is to sell our Sydney home before moving but that scares us.

 

Assuming you are borrowing to buy the new ppor, can you borrow for the new PPOR while keeping the loan on the old property?

 

What do you want to know?
they will be the ones taking the risk
If the lender dies their legal personal representative will want the money back so they can distribute in accordance with the will so the lender should seek legal advice

What if the borrower dies? Their estate will be liable, but it may be delays in getting the money if no liquid assets.

 

Best way all around us to have a solicitor draw up a legal agreement - to protect everyone!

 

If it's a loan, then it needs to be disclosed to a lender for your new purchase. If you have an agreement to borrow $200k to be repaid in 12 months, this would have a big impact on your servicing.

Do you have sufficient equity in your home to be able to increase your current loan amount, so that you have funds for a deposit? Is your income high enough for you to meet the servicing requirements of owning both properties at the same time?

If you are going to sell your home once you have purchased, using a bridging loan and a deposit bond might be a way to avoid borrowing from family. Bridging loans are intended as a short term option and typically need to be repaid within 6 months.

 

If its a short term loan that will be discharged from equity it could be less a concern. The loan inst so much needing "servicing"but is a equity advance.

 

I have had clients in situations like this before and it can be disregarded for servicing in some instances if a related party loan. Just needs some explaining.

 

Another option you can look at, if you want to buy first before you sell is to do a bridging loan. This allows you to have a peak debt which will combine your existing mortgage loan plus the new loan that you need to purchase. You will then have between 6 to 12 months to sell your property and then pay down the peak debt. Your end debt remaining will be your new loan.

The downside to this though is that until you sell your property and pay down the peak debt, you will be charged interest which is around 5.4% indicatively. The interest charges will be added to the loan so you don't have to actually make any loan repayments during the bridging period.

If you can get a loan from your family, it will be the economical option but if you cant, this will be an option.

 

Can you access any equity from the existing PPOR now via an equity release loan?
This would reduce the amount of cash the in laws would need to provide to you