Unusual Serviceability Calculation With 1 parent on loan

Discussion in 'Loans & Mortgage Brokers' started by luckyducky, 30th May, 2020.

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  1. luckyducky

    luckyducky New Member

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    Hi all

    I have a question as to what income/ assets & liabilities are considered in my loan situation for servicability. I have a property purchased with my mother in Melbourne and am looking to refinance now.

    Q- Would my mother be considered for servicing purposes as to managing 100% of the home loan with my father? Or just 50%? We had previously been advised by our broker that ME Bank only considers liability at 50% and not at 100%. Is this correct and do other lenders do the same?

    Facts
    1. I purchased land in Melbourne. Property is titled in my name and my mothers name. The plan is to build on the property and then rent it out as an investment. We live in Sydney.
    2. The property was purchased 1 year ago and we have an IO loan with ME Bank 4.19% (fixed- 2 years to go). This is for cash flow purposes until after the build is completed.
    3. We are looking to refinance to a lower rate that is competitive with the market.
    4. We plan on visiting Melbourne once restrictions are lifted to look at the build- so a lead time for say 6 months before we consider a construction loan.
    5. I do not have any other debts other than this home loan. I have $150k in cash savings and have a stable job- currently at $65,000 but will go up by $20-$30k in the next 3 years.
    6. My mother has a Sydney mortgage with my father- so relatively large and also has a stable job.
    7. My parents are early to mid 50's.

    My concern is that if servicing is run on my mother servicing the entirety of the family home loan- then it would fail.

    Before I look at refinancing, I would like to understand the different lending policies so I can compare switching costs and benefits. I am also going to approach ME Bank to try and get a sharper rate.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    The owners of the property would generally be the borrowers so if your dad is not an owner then he won't be on the loan. if your mother is borrower on another loan jointly with another than 100% of that debt will be consider her liability.

    But some lenders will consider the other loan to be apportioned to the percentage of her legal ownership of the property. This is rare and on a case by case basis - probably unlikely in this situation.
    One other option might be to get your dad to go as a guarantor or a joint borrower potentially
     
  3. luckyducky

    luckyducky New Member

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    Thanks Terry, our mortgage broker specifically advised that we should go with ME Bank as they only consider the apportioned debt and did not assume that 100% of the mothers liability. There were no issues on the initial application with ME Bank.

    My concern now is that the broker is pushing us to an option that is in his best interest as opposed to our circumstances.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    There used to be around 4 or 5 lenders that assessed joint loans on the legal ownership share of the property, AMP was one.
     
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Could you please elaborate ?

    ta
    rolf