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Home Loan Advice / Gifting Property / Equity loans etc!

Discussion in 'Real Estate' started by honkey, 16th Mar, 2008.

  1. honkey

    honkey New Member

    16th Mar, 2008
    Hi everyone, I’m not a property invester but I’m hoping you will allow me to pick your brains anyway.

    Am looking into purchasing my first home and would be very apprecitative of some non-bias advice from people in the know. Keep in mind I have very little knowledge of the property market and had no real interest in it (other then wanting to own my own home one day) until now so some of these questions may be a little dumb or obvious, this is why I want to ask the silly questions before I see the loan officer!

    Upon visiting my parents a few weeks ago we got talking about the property market and my desire to enter into it at some stage in the next few years. My dad mentioned to me that he would be willing to transfer the deed of his property into my and my partner's name so I could use the equity to build a new house on one on the unused blocks of land on his double block, at which point on completion of the new house I would transfer the new house over to him and keep the existing property in my name. The reason for me having the existing property is that it has a brand new fully self-contained flat across the entire bottom level of the house which is currently rented for $210 a week, this would assist with my mortgage greatly.

    Now, if it helps, the property is based in Brisbane, is owned outright and at last valuation was priced around 400k per block (not including existing house on one of the blocks which is really nothing special). I am looking to borrow around 250k to build a new house for them and complete some renos on the existing property for myself.

    Now, this is where so many questions lie -

    1. Would it be better (for both parties) to gift the property or transfer the property based on market value? Unsure of the factors or benefits for either...How much does it cost to gift/transfer?

    2. Uncertain how to work out how much equity you have in your home, but cutting the block in half will also effectively be cutting the equity and what previously was a generous difference between that value and the amount I borrowed would be greatly reduced, does this affect anything? There would still be a decent amount of equity in the new property anyway?

    3. My dad is on a partial disability pension - will transferring the deed to me and then me transferring one back to him affect these payments at all? (Maybe would be better to check with Centrelink on this one)

    4. Will I have to pay capital gains tax? From what I read it is exempt if it has been your principal place of residence and/or built previously to 1985?

    5. Stamp Duty - how much stamp duty applies when building on existing land that you own?

    6. There would be no chance I would be eligible for the First Home Buyers grant obviously?

    7. What is the repayment schedule on an equity loan, I have read in some places there is no set repayment schedule? How does this work?

    ***** The second option is for my dad to go guarantor or for us both go into one of those "family equity" loans together, in which case they would then look into my assets, savings and ability to service the loan a little more thoroughly as I wouldn't have the land asset to my name now. (Don't have a high income and partner is an apprentice but we have good savings and smaller assets)

    Do I need a deposit for this type of loan as I do not yet own the property?
    Would I be eligible for the first home buyers grant?
    Would the same stamp duty and other relevant fees still apply as above, or would it be more/less.
    Would my dad having his name on the deed be looked at as an investment property and therefore have his pension abolished all together?

    ***** The third option is for us to split the block in half, gift/transfer the other property to me and for me to obtain a Construction loan. I have looked into this one with a free mortgage advisor, I pay interest only on the draw down of each stage of the construction which I thought would be beneficial throughout the building process when we would still be needing to pay rent, and the person I spoke to told me I would be eligible for the First Home Buyers Grant as I haven't built a house yet on it yet - but the cons are that I need a fixed price contract from the builder which would not allow me to undertake the renovations I wish to, and also, my name would be on this new property and not on the property I would be living in. I would then need to transfer the properties between my dad and I which would be a bit of a hassle and unnecessary expense.

    I don't want a bells and whistles loan (unless you can give me some good perks that would really benefit me in the above situations!), I am wanting to pay weekly and extra repayments without penalty. Would like the option of being able to fix part or all of the loan but from what I have read you can't do this and make extra repayments on top?

    What advice could you give me? Which would you recommend? Has anyone gone down this road before?

    Sorry this is so long-winded, hoping someone can help!
  2. Billv

    Billv Getting there

    15th Jul, 2007
    Sydney, NSW
    That's some post :)
    We haven't ignored you but it's hard to offer accurate opinion to so many questions.
    Have you tried talking to your accountant?
  3. Saskatoon

    Saskatoon Well-Known Member

    17th Oct, 2005
    Aldgate, SA
    Honkey, a lot to think about. Firstly, your father needs to get advice from Centrelink - they offer a financial advice service - as he would be potentially disadvantaged (e.g. the worst case, even if unlikely: what if you & partner split after being deeded the property and your partner wants his half?). Centrelink will advise on his part pension. Your father could look at the development in his own name first, with you putting in financial assistance as necessary, and you would benefit in the longer term. Much less risk for him! You may get the FHOG if you buy from your father after the dev. is done.
    There are a lot of options! A full discussion with professionals is indicated...
    Last edited by a moderator: 18th Mar, 2008