Whose name should be written on the deed, and what is common debt reducer?

June 24, 2015

Case: Wang is studying in UNSW, he has many friends bought “off-the-plan” apartments, thinking of the he will be living in Australia for a long time, and after consulting with his parents, he decided to buy a new completed apartment. Without thinking too much, he paid the deposit and let his solicitor exchanged the sales contract.

The settlement is 42 days after contract exchanged for new completed apartments. Wang began to prepare to get loans. He heard from friends that he can prepare overseas income loans, but after submitted materials, he found that not all banks accept students to apply for a loan.

Children and parents (new completed apartments)

According to the experience of Wang, normally we suggest students should write down his or her father’s or mother’s name when signing contracts (new completed apartments).

Points need to consider:

  • Parents as overseas are allowed to buy new completed apartments
  • After added parents’ names, borrowers can have more banks to choose, income materials will be more sufficient
  • Children are normally too young to get loan, application will be difficult
  • Student visa is restricted in many banks

Remember that parents’ ownership proportional should be at least more than 20% on the deed, and then the bank would consider making the loan application using parents’ income materials.

Parents and children, husband and wife (first home buyers)

Sometimes anyone of children, husband and wife with PR, and buying a property for the first time, children sometimes need parents’ income support to apply for a loan.  Due to their parents do not have PR; generally 95% property right would belong to children, while parents 5%. It ensure that the child can get FHOG but doesn’t ensure that banks will approve loans, because there will be a 20% ownership requirement.

Husband and wife or with relatives and friends

Many people think that there is nothing to worry about between husband and wife when buying a property?

50/50 is joint tenancy or divided in proportion to tenants in common.

Here it does not mean who owns more proportion or who owns the property. From the perspective of loan applications, we should consider whether to write one name or two names?

Whether your wife doesn’t have a job and taking care of the children at home; whether your wife’s income is higher. This will affect the structure of loan application; you need to reconsider what name should be written on the deeds, and according the proportion.

  • The name on the deed must be as mortgage borrowers. If anyone does not have good financial position, this might affect the loan application.
  • Whose income is higher can have more proportion in deed; this will get more from the tax.

To sum up, remember that if couple’s names are all written on deeds, the loan must be applied by the couple, whether anyone of them has income or not; if one name is written on the deeds, borrowers can be one person or two together.

But if buying a property with a good friend, you can apply loan with your friend.

Common Debt Reducer

What it is the concept?

If loan applicants are not a couple, and sometimes even father and son, or relatives and friends together to buy a property, when applying for loans, the application will be more powerful.

In the same circumstance, however, when anyone of them considers buying another property, there will be trouble occurs.

For example:

Wang and Zhang bought a property together. A, $400,000 loan, rental return is $30,000/ year.

Two years later, the loan balance is $350,000.

Wang would like to buy another property; at this time the bank would not consider Wang has only half of $350,000 loans and $30,000 rental income.

Instead, the full $350,000 counted as Wang’s existing debt, at the same time the half rental $15,000 counted as Wang’s income.

This will make Wang’s lending capacity declines significantly, and he may not be able to continue to buy a second property, unless his income has increased.

So there is no way to buy another property, isn’t it? Actually it’s not.

  • For the first joint purchase property, there is banks can do clear division of the property share, applicants can set up two different loan accounts; so two accounts cannot affect each other.
  • When considering buying a second property, you can consider the common debt reducer, mainstream banks and non – major bank have similar products, and they can divide the loan to two parts, which will not affect your loan capacity.

Hope this article can help.