Complex Loan Structure

Hi guys, need some ideas if this loan is possible.
I purchased H&L package as a First Home Buyer and about to finish construction. Would have approx $300k in equity. Currently, i have around 3 months until i can get full OC.
My son is looking to buy his own first property. Currently his capacity only allows him up to $400k or so. To boost and purchase something around $650-700k, i was thinking to go together on the loan. He is a First Home Buyer, and myself - not a first home buyer any more..
would it be possible to have a loan with 2 parties like that? what are our options here?
Please PM if you need more details..

 

You could be a guarantor. There are some products for "family guarantee" which can limit you exposure if he fails to meet his loan. Little things like death should be considered. Example his estate should make you a beneficiary by will so the debt can be paid down by you if that occurs. Life insurance ? Discuss loan issues with broker. Lenders will not generally allow a non-owner as a borrower unless it is a spouse.

DONT go on his title to make things easier. It will complicate things endlessly. Worth also considering the risk to yourself. You could be exposing your limited equity (or 80% of it if its allowed) to loss. Lenders may also not play the game unless you gift the $$$ to him. Who is going to pay all that loan off and its interest etc ? Its not just the $300K its also its stream of interest and payments to consider. He cant afford it according to his lender so how will that work ?

Equity out loans are subject to YOUR servicing and also will be limited to 80% equity usually. eg Maybe 240K not $300K

All worthy of broker advice

 

no.

 

Other than an immediate spouce, you generally can't have two parties on the loan with only one on the title. If you are on the title you're a co-owner and your son will not be eligible for any first home buyers benefits.

Lenders won't accept you being a servicing guarantor to your sons loan. He has to show he can afford the loan on his own (a spouce can be a co-borrower, but not parents or extended family).

The only realistic solution for him to be able to purchase at a higher price point than he can afford on his own is probably for you to borrow against your house and gift him the money. This means that you are responsible for that loan, not your son. There may be other financial planning considerations as Paul has aluded to.

Has your son received this advice from a broker or from a bank? Lenders have different policies so borrowing capacity does vary from one lender to another depending on the individuals circumstances. Probably not enough to make that much difference here but you never know. He needs to consult a broker to get a wider spectrum of lender capabilities.

Keep in mind that limits on borrowing capacity exist for a reason. Peoples income are finite, so the repayments they can afford are also finite. You don't want to commit to a loan that costs $5,000 a month when your income is only $4000 a month. An alternate solution may be that your son needs to consider a small unit elsewhere for $400k rather than a $700k house. This doesn't have to be the place he lives in forever but it is good to get him into the market.

 

Not possible if youre on title. Cause it's means you're reaping the benefits again. ..

 

All the above mortgage advisors are correct.
When my children needed financial assistance we had to gift the money not loan .
The bank set that criteria.

You are better to just gift your son $300k to $400k.