With housing affordability issues on the rise, a common thought is to turn to family and friends to share property ownership.<\/p>\n
A common scenario\u2026 You\u2019ve found a dream property that\u2019s just out of reach.<\/p>\n
An investment property or holiday house perhaps. And you\u2019re not the only one who loves it. You start sharing ideas with family or friends about how pooling resources could make it all come true.<\/p>\n
Because, what could possibly go wrong?<\/p>\n
Then fast forward five years. Your friends have started a successful new business, and you\u2019re ready to upgrade your own home. No problems, right? Well maybe. From a loan servicing perspective for your new home, many lenders will
\nconsider you 100 per cent responsible for the full investment loan amounts but only credit you with 50 per cent of the
\nincome. The first port of call is to look for a lender with a \u201ccommon-debt-reducer\u201d policy that allows 50 per cent of the loan
\nrepayments (ie the actual repayments).<\/p>\n
However, whether they will accept the income from your friend\u2019s start up business is highly questionable. That could create a big dent in how much they\u2019ll allow you to borrow for your new home.<\/p>\n
That was a rosy picture, with a potential problem that could probably be worked through. But what about a less rosy, and more common scenario.<\/p>\n
It\u2019s time to refinance your own home. The interest rate has blown out, or you\u2019re keen to undertake some renovations.<\/p>\n
You also own an investment property with your brother. If either of these scenarios are true, you may hit brick walls, so find the solution to be more expensive than you\u2019d think:<\/p>\n
Your home is also security for the investment property. You can\u2019t refinance your own home without also refinancing it, and your brother\u2019s not in a position to do that.<\/p>\n
You want to access as much funding as you can, but your brother\u2019s family situation is anything but perfect.<\/p>\n
Common-debt-reducer is out, so from a servicing perspective you\u2019re weighed down by 100 per cent responsibility of
\nthe loan repayments, even though you only pay 50 per cent.<\/p>\n
We haven\u2019t even touched on Parental Guarantees or Guarantor Loans where parents and their children\u2019s financial affairs become highly dependent on each other, or scenarios where family conflict already exists. The bottom line is, it\u2019s difficult to predict the future. But as lending policy tightens, banks are increasingly cautious of any co-borrower arrangements outside of normal household relationships. So expecting complexity (and price) to come with any new or existing arrangements, is a
\nworthwhile mindset, as it might just steer you in another less complicated direction from the outset.<\/p>\n
With over 25 years\u2019 banking and financial services experience, Lanie Conquest at Surf Coast Finance helps local families and businesses make smarter financing decisions. Phone 0418 938 646 or email lanie@surfcoastfinance.com.au.<\/p>\n","protected":false},"excerpt":{"rendered":"
With housing affordability issues on the rise, a common thought is to turn to family and friends to share property ownership. A common scenario\u2026 You\u2019ve found a dream property that\u2019s just out of reach. An investment property or holiday house perhaps. And you\u2019re not the only one who loves it. You start sharing ideas with […]<\/p>\n