Hi, hoping for some advice/pointers on how we should go about this. My partner and I currently own two investment properties (I own one and my partner owns a joint one with her brother), one of which we've started living in about a year ago. We're now looking into buying a PPOR in a more desirable area for us and one which we can live in long term. The sort of areas/houses we're looking at are priced ~ 750k. At this stage, the bank has said we have two options - 1) we can borrow around 600k if we were to get my partner's name off her joint IP or 2) we can borrow $750k if I was to sell my IP. Without doing either we'd only be able to borrow around 150-200k. We're considering taking the first option and using that to purchase a joint IP together and then moving in back with parents or renting for a while and see if we can build enough equity to get the PPOR want. Is this the best option to take or should we consider selling my IP and just buying the PPOR straight away?
Their parents live in that property so selling it isn't an option unfortunately - I should clarify that this is their family home that they purchased off their parents (they live there and pay rent). The brother isn't interested in buying her out either so really the least fuss option we have is to get her name removed or leave it as is.
Is there any CGT or stamp duty on taking your partner's name off the title, per option 1? How does that affect these options?
Good question and one that I had not considered. I didn't realise CGT/Stamp duty might be payable for a title transfer, if that's the case it'll certainly make us more reluctant to do that.
If the brother isn't interested in buying her share, how does one remove their name? selling it to someone else? Have you assessed your borrowing capacity if you did a joint purchase as an IP and then moving into it at a later stage, say in 6-12 months time. Borrowing capacity is generally higher if purchasing as an IP. Assuming you both had purchased before, you don't have any incentive such as stamp duties exemption etc to forgo.
Sorry I think I got confused, the brother is actually okay with buying out her share and her getting her name removed from the title. Yes, I should've mentioned the 150-200k calculation was based on us purchasing it as an IP then moving into it later on along with both our current investment properties being rented out but yeh it still doesn't get us close to that 750k.
My general view on this sort of thing is that you can't accumulate property and off load them at the same time. So ideally, you would hold on to what you own, and accumulate from there. Now the issue of the joint ownership between your partner and her brother is a bit different, and I can understand wanting to untangle and simplify the ownership structure. So selling her half might be appropriate in this instance. I would expect CGT and stamp duty though as there will be a change in beneficial ownership. Sometimes the right approach to building a portfolio is to go slow and pay down debt along the way. There is a lot we don't know about these properties, including when they were bought and how they are performing. But these are my thoughts.
Hey there - have you spoken to a broker, rather than a bank? There are lenders who will disregard your brothers part of the loan as long as he can pay his own way - ie, has a job. Banks all have different policy, so just going to one and getting a no isn't usually the best way to figure out slightly complex scenarios.
Makes sense, I tend to agree with you. The properties were bought in 2010 and 2017, the 2010 one has seen a good amount of growth while the 2017 one is just starting to pick up.
Hi Jess, we haven't spoken to a broker yet but definitely will now. The bank did tell us that some brokers will disregard the brothers part of the loan but was generally saying to avoid smaller lenders as we'll end up having to pay much higher interest rates (not sure how much truth there is to that).
