Tenants in common and borrowing to buy my own home in Canberra?

By 20 August, 2011 12

Hi all,

Some years ago I bought an investment property with my family as tenants in common. I now want to buy my own main residence ( I still live at home). I own 45% of the investment property and when I have seen the ANZ bank and a couple brokers, they have told me that they look at 100% of the loan liability and only 45% the income. This basically blows my liabilities out and I can only borrown 100k, which is no where near enough.

As far as I know I have the following options:

    A) transfer the title of my share to my family (pay stamp duty and CGT, refinance the loan and hopefully their incomes will cover it)

    B) Transfer title to a trust I set up with a trustee company and take my income as guarantor for the trust ( same as above but I still own the share of the property).

Selling is not an option unfortunately. I was wondering if I were to do option B will I still need to disclose the investment loan when applying for a home loan? Or because it is a contigent liability I will then be able to free up my borrowing capacity?

Or if anyone else has any ideas that might help me out?

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12 Responses to Tenants in common and borrowing to buy my own home in Canberra?
#1
RedDogInCan12:29 am, 21 Aug 11

You could inherit the property if the rest of your family met with an unfortunate ‘accident’. Well, you did ask.

#2
whitelaughter12:48 am, 21 Aug 11

okay – if you are transferring the ownership to your family, and they’re tenants, then I don’t think you’re liable for stamp duties: it should count as a “first home”. (This was the case when I was working in Stamp Duties, but that was many, many years ago so the rules may have changed).

#3
Jpo4:00 am, 21 Aug 11

Refinance with a bank that will allow you to limit your liability on the loan in proportion to your ownership of the property (ie 45%). If there is enough equity in the property there may be a bank that will do this but don’t count on it.

Otherwise you will have to take a hit on the stamp duty and CGT, or wait until you save some more money before buying again. Probably would be a good idea to get advice from competent professional advisers though, rather than relying on the opinion of people on the internet.

#4
c`8:10 am, 21 Aug 11

RedDogInCan said :

You could inherit the property if the rest of your family met with an unfortunate ‘accident’. Well, you did ask.

Much easier in that case if they were joint tenants.

#5
caf1:26 pm, 21 Aug 11

There shouldn’t be CGT to pay if it’s your primary residence, at least.

#6
I-filed1:46 pm, 21 Aug 11

caf said :

There shouldn’t be CGT to pay if it’s your primary residence, at least.

It isn’t the primary residence though – Jammed said he/she lives at home … absolutely definitely CGT will apply, as will stamp duty (to qualify for first-home exemption, you have to be living there!) Wouldn’t some kind of ACT property tax apply as well, as it’s a rental? I don’t think renting to family means you can avoid all these imposts …

#7
caf2:18 pm, 21 Aug 11

Oh right, I misunderstood – I thought the jointly-owned property was the family home.

#8
RedDogInCan4:32 pm, 21 Aug 11

c` said :

RedDogInCan said :

You could inherit the property if the rest of your family met with an unfortunate ‘accident’. Well, you did ask.

Much easier in that case if they were joint tenants.

Which is why you should always get good legal advice before entering into financial arrangements with family.

#9
I-filed4:39 pm, 21 Aug 11

Why do you say selling isn’t an option? Why did you enter an arrangement you can’t extricate yourself from?

#10
carmo5:40 pm, 21 Aug 11

I also bought a property with other family members a few years ago and our finance is through St George Bank. I have since bought another property on my own with finance also through St George Bank. They are one of the few lenders who use something called a “common debt reducer” which recognises that for instance, you only own 45%. I had to provide tax returns from all other family members involved in the first loan to prove that they were capable of servicing their share of the loan.

It might be worth checking St George out to see if it will work in your situation.

Hope this helps.

#11
OzChick10:52 pm, 21 Aug 11

whitelaughter said :

okay – if you are transferring the ownership to your family, and they’re tenants, then I don’t think you’re liable for stamp duties: it should count as a “first home”. (This was the case when I was working in Stamp Duties, but that was many, many years ago so the rules may have changed).

No, this is incorrect. If 45% of the property (Jammed’s share) was being transferred to his family, then his family or whoever buys out his share will incur stamp duty on either: (1) 45% of the current market value of the property; or, (2) the amount that they pay him for his share. Whichever is greater.

There is no avoiding stamp duty in this instance, unless (as stated by a previous poster) the transfer is in accordance to a deceased estate, family court order or something similar.

#12
deejay8:56 am, 22 Aug 11

Try Commonwealth Bank. They’re quite investor friendly in my experience. You should not be recognised as liable for the whole loan – that’s for joint ownership, not tenants in common.

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