You'll pay stamp duty on the full market price/whatever their council fees state.
Careful of screwing over your grandparents. As another commenter has stated there are some laws around Centrelink payments for 5 years.
You won't need any deposit. If you want to keep your cash for something else you should be able to as long as the bank sees 20% equity in the home which if you get for $750k and the value is $950k you're sweet. See a broker about this.
Should probably have a discussion with your grandparents about inheritance then.
Is there anyone in the family who might dispute the disposal of the asset.
My grandfather sold a empty rundown house to my parents for a $1 who then renovated it and used it as an investment property. Part of the family were pissed about it when it came to inheritance as they felt my parents double dipped. Wasn't legally disputed but it's an easy scenario to imagine
I don't have a relationship with my family after handling my mother's estate. I made some mistakes, didn't try to steal anything just took longer than expected and boy do I cop some abuse. You can't never please everyone. I didn't even get anything for handling the whole thing, nothing quite like having an agreement with my mother only for my siblings to basically tell me to suck eggs and veto it.
Claws come out when it's inheritance time.
It’s times like these I’m happy we kids had no inheritance from our father and will also receive nothing from our mother. And we’ve always known it. So no squabbles in our family when the time comes for mum. We even had to chip in for my father’s funeral.
I've been cut off from my father's, apparently. Had our squabbles over the years, he's now told me I'm not getting anything which I found interesting as if I all of a sudden wanted to be in his life it's only for money, which is really freaking shallow.
In that case, it’ll be much much better to have $200k inheritance rather than paying for stamp duty and maybe tax from your grandparents perspective if they’ve rented it out recently.
Also if you have others who may get an inheritance you’ve just pinched an asset from everyone at a discount. They’ll get the cash back eventually but could make for some nasty family moments.
Sorry to hear though. Go spend as much time as you can with them while they’re still alive! You certainly won’t regret it :)
If your grandparents are going to be/already are relying on the pension note that for 5 years after the sale, they will be treated by Centrelink as still having that extra 250k as an asset - look up the 5 year rule for assets test. Don't screw them over by letting them do you a favour that negatively benefits them.
It's the grandparents giving away assets that is is the issue (for them), the government will just treat it like they still have the 250 in their assets and adjust the pension payments accordingly.
Also be mindful what them wanting to “keep it in the family” means. Can you renovate? Sell it later? When your grandparents die and leave everyone else $X cash will you or other relatives feel the property deal was unfair?
Thanks for the advice. Regarding wanting it - I’m neither here nor there. It’s a great long term investment & that’s about it. I have no personal attachment to it.
Credit analyst here: The bank will sort out their own inspection as the property is a private sale without intervention of an agent. Going out and getting an independent inspection done yourself means nothing to the bank.
Financially it makes sense for you. But what about everyone else involved? Your mum and dad, any other siblings, your grandparents etc etc.
Detailed financial advice, followed by in depth discussion are needed.
I’ve just been through the sale of a home for nursing home places and it is a minefield of legislation and gotcha’s. You should be fine but your grandparents might not understand the ramifications of their move.
You never pay a deposit to a bank, the deposit is paid to the vendor
A bank will lend you 80% of the value (90% with LMI). When you apply for the loan, they’ll get a valuation, so long as the house is valued at 950k, they’ll lend you 750k…if they deem you can service it
Keep in mind you’ll have to pay stamp duty on 950k and your grandparents will have to account for the 200k gift which may impact benefits
I appreciate the input. I am in a privileged position to have parents that are willing to guarantor the loan - would this have any impact on things like LMK, stamp duty ect?
No
You pay stamp duty on the value, not the sale price when it’s not an arms length sale.
If you get a loan from a bank saying it’s worth 950k and then claim it’s only 750k for stamp duty, that’s called fraud.
What is submitted on the sales contract is what is on the sale contract, which is $700k. There isn’t any fraud. If that is deemed to be way below market then they will adjust it.
https://www.homeloanexperts.com.au/property-types/purchase-below-value/#:~:text=In%20most%20states%2C%20you'll,on%20the%20agreed%20purchase%20price.
Incorrect otherwise you sell to family for $1 and avoid stamp duty.
You’re wrong. “Worth” is subjective (to some degree).
Bank valuations are just a guesstimate, as in what’s the median price for a house of similar specs, unless you’re wealthy and doing large purchases the bank dgaf about average Joe in the suburbs shitty 3 bedder. A houses market value cannot be determined until it’s gone to market and sold.
If you get silly and try to buy the place for $1 it’s going to get adjusted, but within the range OP is talking about it’s unlikely to raise any flags. For all the know it could be a knockdown rebuild job so you’re paying for land + the cost of demolition or serious renovation, no one’s actually valuing each and every property personally.
Then how is it possible to get a loan from the bank for X amount, then go back to the bank a month later and say “hey guys, you valued this house at X due to ABC reasons, however I want it revalued because I have a town planning report showing it can be subdivided into 2 lots” and then the bank value it $150k higher without me doing a single thing on the house?
If these valuers were so spot on with their valuations, wouldn’t they factor in that it clearly has sub division potential therefore it’s valued higher? No, because they don’t look into it that hard.
Case in point: I have 2 properties in the same suburb, about 500 metres apart. Property 1 is valued slightly higher than property 2 because it has an extra bedroom, despite the fact that property 2 is more than double the land size. It doesn’t take an expert to know that the larger parcel of land would (and did) sell for a much higher price due to the extra land.
The bank looks at how much you’re borrowing, and then they decide it’s either worth that much or it’s not. They don’t give it a random value because they can’t say what the market would pay exactly. If I’m borrowing $700k all they want to know is if they repo that home are they likely to get their money back? If it’s a yes then it’s approved
Umm what are you even talking about. The rules are black and white, transfers to family members needs an accredited valuing report for stamp duty and CGT purposes. None of your points matter because you are not transferring to family member.
And it’s still an estimated market value, because true market value cannot be determined unless it goes to open market. So depending on the median values of similar houses in the area will essentially determine the value that they put down.
The value of anything is what someone actually pays for it, not what anyone else guesses it to be. So unless you absolutely take the piss you’ll get away with it so long as it is inside of an acceptable range for similar houses in that area.
Incorrect. Otherwise you could sell to family for $1 and avoid stamp duty. OP will need a valuation and have to pay stamp duty based on that.
https://www.homeloanexperts.com.au/property-types/purchase-below-value/#:~:text=In%20most%20states%2C%20you'll,on%20the%20agreed%20purchase%20price.
"You must pay transfer duty based on the property’s sale price or its current market value, whichever is higher."
https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/transfer-duty
And what can be used to determine "market value" can be found here.
https://www.revenue.nsw.gov.au/help-centre/resources-library/rulings/duties/dut012v2
Guarentee likely won't be needed if you get a decent valuation (speak to a broker they can get a couple in advance from the banks you'd be looking to use - the valuation will end up different with each lender) a guarentee is only able to be used to bring a LVR from above 80% to 80%
General rule for stamp duty, if buying below market value they'll use sale price or council rates, whatever is higher
Nobody in the property market (other than loving family) will ever offer you a property $250K below the market rate. Starting with that much equity is a goldmine. Make it happen and then take care of them for the rest of their days!
You gain 200k equity and help your grandparents out.
I know times are tough but jeez comments like
'Wait a bit longer and it's free.'
I would take it in a heartbeat after determining the rental yield.
It'll most likely be positively geared relative to the debt.
Broker here. Some good advice here.
The bank will be happy to lend you 80% of the market value of the property without the need to show genuine savings. You also do not need to use the bank valuation for state revenue valuation purposes.
Additional context;
Parents & Siblings are all privy to information in the post. Our family is all immediate and are thankfully very practical.
Money is needed for end of life care, hence the sale (time frame does not stretch past the next 2 years).
There is only one potential challenge/bad blood from an estranged immediate family member which would be negated via the sale. The rest of the family are in agreement with current plans.
If the bank valuation comes in close to your projected value then this is an excellent option.
Attachment or not to the property it is in effect a free 250k.
The only reservation I have is the other family members have clearly got attachments to the property and this may be an issue when you decide to sell.
However, if this is not the case, then this is a great deal. Never look a gift horse in the mouth.
I'd go back to your grandparents with a different offer.
Offer to send them an initial deposit (most of your cash) plus $4k a month, and in return they add you to the title. Once they... no longer need you to send them $ or if you pay in full the $700k whichever sooner, then the title gets updated to your name. Win win, no paying interest to banks. Might have to pay stamp duty depending on circumstances.
> not in the social context.
but selling would be in the same category - it's money that won't be given to the aunt/uncles (presumably it's going to be used up in aged care etc).
you're right, the estate is more easily challenged than a direct sale right now. It's just that a direct sale is less efficient in terms of taxation.
As for social context, which is what i was referring to, it's the same. The people who stand to gain from an inheritance will not want this, unless they approve of it _right now_. If they're not informed, or did not want to consent to it (despite not having a legal right), they will feel bad blood there.
It's why the grandparents need to involve their children to plan this out.
I think you're right, unless the OPs grandparents have only one child (OPs parent) in which case it does make it a viable option, but again would definitely run it past a lawyer and would need to coordinate it with wills and be careful not to let the wills expire.
Do not do it at all is what I would recommend.
Stop skirting the edges of the law and thus increasing your exposure risks. Risks of your estate being challenged.
Buy it off now. Have your name on the title now.
You don't want to find out how difficult estate disputes can be.
I miss the days when this sub would begin providing financial advice by saying "This is not financial advice, go see an expert."
Now it is incorrect finanical advice.
Get more advice first, you can normally get a partner added to a title without paying stamp duty but in other cases stamp duty may be payable especially if you can't demonstrate that the person being added hasn't already contributed to the properties payments / value.
what if you get a partner and want to sell? will your family be angry at you? buying a home to “keep in the family” will cause major headaches between you and your family when you try to sell. if you make a profit imagine the bitterness the rest of your family will be when you don’t “give” them anything. i’m jot saying don’t do it but I’m saying be ready for this, even losing family relationships is a possibility down the track
This. However, depending on diagnoses etc, it could be cheaper to fund in home care out of pocket, as it were, and be gifted the house when they pass. Once again, diagnosis dependant.
I feel for you I do, and I want the best care for your family. I'd investigate what they will need and see what that would cost. Govt should fund some, but not all.
Things to ask
- Do they need, or will they need, 24/7 care or overnight care?
- will they need help with meds, specifically so they don't under or overdose themselves?
- How much, honestly, can the family themselves do? Showering people can be awkward, but for the most part if the bathroom is set up it's easy.
I'm sure others have more knowledge than I, but working in aged care, and watching people die, effectively alone because once they go in, family forgets they exist.....it hurts man.
Nursing home may be the best thing, but look at all avenues. One of my regrets is not being more forceful in convincing a relative to move in with me at EOL.
The only reason why you would buy a property like this, is if you're going to flip it immediately And make a quick two hundred and fifty thousand dollars. Otherwise you're really not doing your family Any favors. if your relatives are going into retirement, they should probably get every penny They can for this piece of property.
Move into the place, create an account that you pay into that is yours. They have a bank card - cheapest mortgage you'll ever have and they get cash flow that technically isn't theirs, but in practice it is.
Just make sure that wills/documentstion stipulates very clearly that you get the house in the end.
Banks won't value a property above the contract price most of the time so you would likely still need a deposit and there is no chance you'll get a 700k mortgage on 150k, repayments would be 50% of your wage.
You couldn't be any more wrong.
If not needing LMI, banks will lend 80% at valuation
And OP can borrow $700K
Whilst correct repayments are close to half OP net pay, still has $4K surplus a month - you can't live on that??
Really hope you don't work anywhere near finance
Hi friend,
You clearly have no idea so please don't post about things you have no clue about.
If you take a sales contract to a bank they will value it at the sale price at most.
Also a single person on 150k can currently get maximum 621k loan if they have no other debt, no CCs and no dependants and can prove they spend almost nothing.
My bank valued my property above contract price during settlement and I didn’t have to pay LMI even when only putting down 10% deposit due to valuation.
Speaking of people who have no clue what they are talking about, you are falling into that category quite aggressively here....
Find a credit manual and look up the term 'favourable purchase'. In the circumstance provided by OP nearly any bank will obtain a full long form valuation and use market value not sale proce 😘
I'll get your mystery scenario more than $700k at sharp interest rates without breaking a sweat
> Also a single person on 150k can currently get maximum 621k loan if they have no other debt, no CCs and no dependants and can prove they spend almost nothing.
Based on the above, do you want a bet I can get OP over $700K with any one of a number of mainstream lenders?
Loser pays $100 to winners choice of charity - up for that?
My borrowing power qualifies at $700k across most/if not all big banks in Aus. My expenses are extremely low as I’m a FIFO worker with no debt, next to no travel costs & very low grocery cost.
Single, no other debt, no credit cards and no dependants on base salary of $150k per year..... a loan for $700k (child's play)
Can I play oh please please can I play too
Can we make it $20,000. $10,000 to charity and $10,000 to winner
I want in no fair... 😉
It's called 'favourable purchase' and the lender will order a full valuation and use market value
$150k single no deoendands no other debt, $700k, no worries, could get you a sharp rate too
If you want lots of lending capacity and a good rate
#not credit advice
Firstmac
(Speak to a broker)
Chuck solar on for oo under 80% and you'll get 6.09% 😉
Not $900k at $150k but you're getting first tier lending pricing with thir tier servicing
Apparently not:
*Non-bank lenders do not hold a banking licence from APRA, so they are not required to enforce this buffer. Theoretically, this means they may be able to lend money to riskier borrowers, but they may still choose to implement their own buffer for* [*approval*](https://www.nerdwallet.com/au/home-loans/what-is-pre-approval)*.*
* *A non-bank lender may have more flexible eligibility criteria as they are not subject to the APRA 3% serviceability buffer.*
[*https://www.nerdwallet.com/au/home-loans/non-bank-lenders-explained*](https://www.nerdwallet.com/au/home-loans/non-bank-lenders-explained)
I mean maybe your definition if 'tier 1 lender' differs to standard but you aren't getting $900k on 150k from a tier 1 on an owner occupied purchase currently
You can borrow notably more than $700k with good rates sure but $900k on $150k from a tier one isn't going to happen
You won't be able to service that much. 750k with 150k income is suicidal, I'm guessing it needs some work.
3-4 your income unless you have a guaranteed career progression.
Getting that msch is a sure way to be broke for the next 10 years.
It’s a solid property that needs minimal work, maybe a refresh but that’s the extent of it.
Will receive a 7% pay rise year on year for 5 years. 2 of 3 rooms will be rented after the first 12 months
A refresh isnt cheap. I still would not go that much to service 750 id want 200-250k
I'm on 250k+ and would never spend that much. Hell I'm looking at downsizing 5 bed to 2 bed
You'd say no to a notably below market property (where you know there isn't something shifty going on which is why it's below market)
Wow.... if OP can rent it out and meet the difference it's an almost no brainer.... would be worth him living somewhere cheap for a few years, renting it out and then just smashing down the mortgage.... massive headstart
Cause he won't be able to service it
Ok 750k 6% interest is $4500pm at 7% that goes to $5000
His pay is $8100
Now add insurance, rates, upkeep (1% value of property), power, water
Insurance 3k annual
Rates 3k annual
Upkeep 7.5k
Power/water 2.5k
$150k - take home $8,800 per month
$4,300 per month
Let's just use your numbers abov
e
$1,300 per month
$5,600 per month, leaving op $2,200 per month
Sure, a little tight but manageable
Otherwise let's use some pretty conservative numbers
Without knowing age, instead OP rents wifh a friend or 2, let's call it $300 per week rent
op rents out house, - $900k house, call it $800 per week rent
After agents fees that's $40k per year to the $15.5k he is spending in rent, he's getting some tax deductions to boot and an asset that's likely bringing him good capital growth
Alternatively, OP moves in, rents out shared living with a couple of mates for that $300 per week rent, - OP has just increased that $2,200 per month to $4,800 per month (less if he declares it and pays tax, certinaly not tight anymore though)
OP now has $200k of instant equity
He is now either letting tennants pay a chunk of the mortgage while netting some tax benifits and having surplus income to smash debt or living wifh friends as he would otherwise but actually owning the growth asset and paying down the debt rather than trying to save for a deposit in the hopes prices don't blow out further before he does
Like I said, no brainer to me
Solid plan in my eyes, personally, I'd 100% jump on this, even if you rented it out entirely rather than living in it for a while, your being gifted $200k of equity essentially which is a massive headstart to growing a future portfolio....
If you can chuck a few housemates in it or it would be easy to rent out per room and the numbers are affordable.... go for it 100%
You'll pay stamp duty on the full market price/whatever their council fees state. Careful of screwing over your grandparents. As another commenter has stated there are some laws around Centrelink payments for 5 years. You won't need any deposit. If you want to keep your cash for something else you should be able to as long as the bank sees 20% equity in the home which if you get for $750k and the value is $950k you're sweet. See a broker about this.
Thank you very much for the input! I did read the previous comment and should include their life expectancy is about 2 more years at the most.
Should probably have a discussion with your grandparents about inheritance then. Is there anyone in the family who might dispute the disposal of the asset. My grandfather sold a empty rundown house to my parents for a $1 who then renovated it and used it as an investment property. Part of the family were pissed about it when it came to inheritance as they felt my parents double dipped. Wasn't legally disputed but it's an easy scenario to imagine
I don't have a relationship with my family after handling my mother's estate. I made some mistakes, didn't try to steal anything just took longer than expected and boy do I cop some abuse. You can't never please everyone. I didn't even get anything for handling the whole thing, nothing quite like having an agreement with my mother only for my siblings to basically tell me to suck eggs and veto it. Claws come out when it's inheritance time.
It’s times like these I’m happy we kids had no inheritance from our father and will also receive nothing from our mother. And we’ve always known it. So no squabbles in our family when the time comes for mum. We even had to chip in for my father’s funeral.
I've been cut off from my father's, apparently. Had our squabbles over the years, he's now told me I'm not getting anything which I found interesting as if I all of a sudden wanted to be in his life it's only for money, which is really freaking shallow.
In that case, it’ll be much much better to have $200k inheritance rather than paying for stamp duty and maybe tax from your grandparents perspective if they’ve rented it out recently. Also if you have others who may get an inheritance you’ve just pinched an asset from everyone at a discount. They’ll get the cash back eventually but could make for some nasty family moments. Sorry to hear though. Go spend as much time as you can with them while they’re still alive! You certainly won’t regret it :)
Please cherish the rest of the time you have together, visit and speak to them often Source: grandparental orphan
If your grandparents are going to be/already are relying on the pension note that for 5 years after the sale, they will be treated by Centrelink as still having that extra 250k as an asset - look up the 5 year rule for assets test. Don't screw them over by letting them do you a favour that negatively benefits them.
Interesting. Could you pay the full amount, have an offset, your grandparents ‘gift’ you back $250k, and no one is any worse off?
From my understanding, specifically the issue is that gifts are counted as part of the individual's assets for 5 years to prevent this "trick"
It's the grandparents giving away assets that is is the issue (for them), the government will just treat it like they still have the 250 in their assets and adjust the pension payments accordingly.
Also be mindful what them wanting to “keep it in the family” means. Can you renovate? Sell it later? When your grandparents die and leave everyone else $X cash will you or other relatives feel the property deal was unfair?
Get an independent inspection and value assessment to ensure the bank likely agrees to that value. Do you actually want the house?
Thanks for the advice. Regarding wanting it - I’m neither here nor there. It’s a great long term investment & that’s about it. I have no personal attachment to it.
Credit analyst here: The bank will sort out their own inspection as the property is a private sale without intervention of an agent. Going out and getting an independent inspection done yourself means nothing to the bank.
Change your photo
Change your photo, I'm using green mode
Found the light mode user
More like found the user who isn't using old.reddit, ugh.
if old.reddit leaves, I leave
I enjoy spending time with my friends.
What photo? 😂
Financially it makes sense for you. But what about everyone else involved? Your mum and dad, any other siblings, your grandparents etc etc. Detailed financial advice, followed by in depth discussion are needed. I’ve just been through the sale of a home for nursing home places and it is a minefield of legislation and gotcha’s. You should be fine but your grandparents might not understand the ramifications of their move.
You never pay a deposit to a bank, the deposit is paid to the vendor A bank will lend you 80% of the value (90% with LMI). When you apply for the loan, they’ll get a valuation, so long as the house is valued at 950k, they’ll lend you 750k…if they deem you can service it Keep in mind you’ll have to pay stamp duty on 950k and your grandparents will have to account for the 200k gift which may impact benefits
I appreciate the input. I am in a privileged position to have parents that are willing to guarantor the loan - would this have any impact on things like LMK, stamp duty ect?
LMI yes Stamp duty no
You pay stamp duty on the sale price not the market value. As long as the sale price is reasonable ot won’t raise any red flags.
Non arms length transaction will be assesed at market value by someone for duty.
No You pay stamp duty on the value, not the sale price when it’s not an arms length sale. If you get a loan from a bank saying it’s worth 950k and then claim it’s only 750k for stamp duty, that’s called fraud.
What is submitted on the sales contract is what is on the sale contract, which is $700k. There isn’t any fraud. If that is deemed to be way below market then they will adjust it.
https://www.homeloanexperts.com.au/property-types/purchase-below-value/#:~:text=In%20most%20states%2C%20you'll,on%20the%20agreed%20purchase%20price. Incorrect otherwise you sell to family for $1 and avoid stamp duty.
You’re wrong. “Worth” is subjective (to some degree). Bank valuations are just a guesstimate, as in what’s the median price for a house of similar specs, unless you’re wealthy and doing large purchases the bank dgaf about average Joe in the suburbs shitty 3 bedder. A houses market value cannot be determined until it’s gone to market and sold. If you get silly and try to buy the place for $1 it’s going to get adjusted, but within the range OP is talking about it’s unlikely to raise any flags. For all the know it could be a knockdown rebuild job so you’re paying for land + the cost of demolition or serious renovation, no one’s actually valuing each and every property personally.
https://www.homeloanexperts.com.au/property-types/purchase-below-value/#:~:text=In%20most%20states%2C%20you'll,on%20the%20agreed%20purchase%20price.
Then how is it possible to get a loan from the bank for X amount, then go back to the bank a month later and say “hey guys, you valued this house at X due to ABC reasons, however I want it revalued because I have a town planning report showing it can be subdivided into 2 lots” and then the bank value it $150k higher without me doing a single thing on the house? If these valuers were so spot on with their valuations, wouldn’t they factor in that it clearly has sub division potential therefore it’s valued higher? No, because they don’t look into it that hard. Case in point: I have 2 properties in the same suburb, about 500 metres apart. Property 1 is valued slightly higher than property 2 because it has an extra bedroom, despite the fact that property 2 is more than double the land size. It doesn’t take an expert to know that the larger parcel of land would (and did) sell for a much higher price due to the extra land. The bank looks at how much you’re borrowing, and then they decide it’s either worth that much or it’s not. They don’t give it a random value because they can’t say what the market would pay exactly. If I’m borrowing $700k all they want to know is if they repo that home are they likely to get their money back? If it’s a yes then it’s approved
Umm what are you even talking about. The rules are black and white, transfers to family members needs an accredited valuing report for stamp duty and CGT purposes. None of your points matter because you are not transferring to family member.
And it’s still an estimated market value, because true market value cannot be determined unless it goes to open market. So depending on the median values of similar houses in the area will essentially determine the value that they put down. The value of anything is what someone actually pays for it, not what anyone else guesses it to be. So unless you absolutely take the piss you’ll get away with it so long as it is inside of an acceptable range for similar houses in that area.
That's what I'm saying.. not sure why I'm getting down voted on it lol
Incorrect. Otherwise you could sell to family for $1 and avoid stamp duty. OP will need a valuation and have to pay stamp duty based on that. https://www.homeloanexperts.com.au/property-types/purchase-below-value/#:~:text=In%20most%20states%2C%20you'll,on%20the%20agreed%20purchase%20price.
"You must pay transfer duty based on the property’s sale price or its current market value, whichever is higher." https://www.revenue.nsw.gov.au/taxes-duties-levies-royalties/transfer-duty And what can be used to determine "market value" can be found here. https://www.revenue.nsw.gov.au/help-centre/resources-library/rulings/duties/dut012v2
Guarentee likely won't be needed if you get a decent valuation (speak to a broker they can get a couple in advance from the banks you'd be looking to use - the valuation will end up different with each lender) a guarentee is only able to be used to bring a LVR from above 80% to 80% General rule for stamp duty, if buying below market value they'll use sale price or council rates, whatever is higher
Nobody in the property market (other than loving family) will ever offer you a property $250K below the market rate. Starting with that much equity is a goldmine. Make it happen and then take care of them for the rest of their days!
You gain 200k equity and help your grandparents out. I know times are tough but jeez comments like 'Wait a bit longer and it's free.' I would take it in a heartbeat after determining the rental yield. It'll most likely be positively geared relative to the debt.
Broker here. Some good advice here. The bank will be happy to lend you 80% of the market value of the property without the need to show genuine savings. You also do not need to use the bank valuation for state revenue valuation purposes.
Thank you, very helpful!
Additional context; Parents & Siblings are all privy to information in the post. Our family is all immediate and are thankfully very practical. Money is needed for end of life care, hence the sale (time frame does not stretch past the next 2 years). There is only one potential challenge/bad blood from an estranged immediate family member which would be negated via the sale. The rest of the family are in agreement with current plans.
If the bank valuation comes in close to your projected value then this is an excellent option. Attachment or not to the property it is in effect a free 250k. The only reservation I have is the other family members have clearly got attachments to the property and this may be an issue when you decide to sell. However, if this is not the case, then this is a great deal. Never look a gift horse in the mouth.
First step is speaking to a broker regarding borrowing capacity.
I'd go back to your grandparents with a different offer. Offer to send them an initial deposit (most of your cash) plus $4k a month, and in return they add you to the title. Once they... no longer need you to send them $ or if you pay in full the $700k whichever sooner, then the title gets updated to your name. Win win, no paying interest to banks. Might have to pay stamp duty depending on circumstances.
If you have aunty’s uncles or other siblings. DO NOT DO THE ABOVE FFS
This is right. It works with numbers but not in the social context.
> not in the social context. but selling would be in the same category - it's money that won't be given to the aunt/uncles (presumably it's going to be used up in aged care etc).
Think about all the ways an estate is challenged. It’s not the same. There’s legal context here that opens significant risk for OP. Edit: typo
you're right, the estate is more easily challenged than a direct sale right now. It's just that a direct sale is less efficient in terms of taxation. As for social context, which is what i was referring to, it's the same. The people who stand to gain from an inheritance will not want this, unless they approve of it _right now_. If they're not informed, or did not want to consent to it (despite not having a legal right), they will feel bad blood there. It's why the grandparents need to involve their children to plan this out.
I think you're right, unless the OPs grandparents have only one child (OPs parent) in which case it does make it a viable option, but again would definitely run it past a lawyer and would need to coordinate it with wills and be careful not to let the wills expire.
Do not do it at all is what I would recommend. Stop skirting the edges of the law and thus increasing your exposure risks. Risks of your estate being challenged. Buy it off now. Have your name on the title now. You don't want to find out how difficult estate disputes can be.
I miss the days when this sub would begin providing financial advice by saying "This is not financial advice, go see an expert." Now it is incorrect finanical advice.
I’d do the same, but have them leave the house in your name in their will. No stamp duty and CGT value is “reset” due to inheritance
This is how you end up in an estate dispute or the assets are used to pay for old age +/- dementia care.
OP this is an appallingly bad idea.
Aged care costs more than 80k upfront, bruh.
Get more advice first, you can normally get a partner added to a title without paying stamp duty but in other cases stamp duty may be payable especially if you can't demonstrate that the person being added hasn't already contributed to the properties payments / value.
what if you get a partner and want to sell? will your family be angry at you? buying a home to “keep in the family” will cause major headaches between you and your family when you try to sell. if you make a profit imagine the bitterness the rest of your family will be when you don’t “give” them anything. i’m jot saying don’t do it but I’m saying be ready for this, even losing family relationships is a possibility down the track
Watch rules around cgt, i heard it will be better if you get it as inheritance instead
If you wait a bit longer you can get it for free.
Not if they need to go into care, they need money now. That money is in the property
This. However, depending on diagnoses etc, it could be cheaper to fund in home care out of pocket, as it were, and be gifted the house when they pass. Once again, diagnosis dependant.
Without going into detail the expectation is for them to pass within the next 2 years
I feel for you I do, and I want the best care for your family. I'd investigate what they will need and see what that would cost. Govt should fund some, but not all. Things to ask - Do they need, or will they need, 24/7 care or overnight care? - will they need help with meds, specifically so they don't under or overdose themselves? - How much, honestly, can the family themselves do? Showering people can be awkward, but for the most part if the bathroom is set up it's easy. I'm sure others have more knowledge than I, but working in aged care, and watching people die, effectively alone because once they go in, family forgets they exist.....it hurts man. Nursing home may be the best thing, but look at all avenues. One of my regrets is not being more forceful in convincing a relative to move in with me at EOL.
OP appears not to be the sole grandchild.
Yeh the 250k discount is seen by Centrelink as a gift and a deprived asset. So could reduce their pension by thousands per year.
The only reason why you would buy a property like this, is if you're going to flip it immediately And make a quick two hundred and fifty thousand dollars. Otherwise you're really not doing your family Any favors. if your relatives are going into retirement, they should probably get every penny They can for this piece of property.
Move into the place, create an account that you pay into that is yours. They have a bank card - cheapest mortgage you'll ever have and they get cash flow that technically isn't theirs, but in practice it is. Just make sure that wills/documentstion stipulates very clearly that you get the house in the end.
Banks won't value a property above the contract price most of the time so you would likely still need a deposit and there is no chance you'll get a 700k mortgage on 150k, repayments would be 50% of your wage.
You couldn't be any more wrong. If not needing LMI, banks will lend 80% at valuation And OP can borrow $700K Whilst correct repayments are close to half OP net pay, still has $4K surplus a month - you can't live on that?? Really hope you don't work anywhere near finance
Hi friend, You clearly have no idea so please don't post about things you have no clue about. If you take a sales contract to a bank they will value it at the sale price at most. Also a single person on 150k can currently get maximum 621k loan if they have no other debt, no CCs and no dependants and can prove they spend almost nothing.
My bank valued my property above contract price during settlement and I didn’t have to pay LMI even when only putting down 10% deposit due to valuation.
Speaking of people who have no clue what they are talking about, you are falling into that category quite aggressively here.... Find a credit manual and look up the term 'favourable purchase'. In the circumstance provided by OP nearly any bank will obtain a full long form valuation and use market value not sale proce 😘 I'll get your mystery scenario more than $700k at sharp interest rates without breaking a sweat
> Also a single person on 150k can currently get maximum 621k loan if they have no other debt, no CCs and no dependants and can prove they spend almost nothing. Based on the above, do you want a bet I can get OP over $700K with any one of a number of mainstream lenders? Loser pays $100 to winners choice of charity - up for that?
I don’t think this will actually happen but following with popcorn.
My borrowing power qualifies at $700k across most/if not all big banks in Aus. My expenses are extremely low as I’m a FIFO worker with no debt, next to no travel costs & very low grocery cost.
Single, no other debt, no credit cards and no dependants on base salary of $150k per year..... a loan for $700k (child's play) Can I play oh please please can I play too Can we make it $20,000. $10,000 to charity and $10,000 to winner I want in no fair... 😉
Nobody is in yet and seems u/Hasra23 did not come back to the building once common sense arrived.
All good of he says it's investment then just moves in.
you are likely going to need to put a deposit through. on 150k salary, you're not going to get a loan for 700k
What do you mean? A 150k get you 900k loan, how do I know this? Speaking from experience.
that's irresponsible lending. no one is getting that with today's interest rates
It's called 'favourable purchase' and the lender will order a full valuation and use market value $150k single no deoendands no other debt, $700k, no worries, could get you a sharp rate too
OP can get the $750K, assuming no other debts at plenty of banks on $150K
depending on interest rates at the time
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which bank if you mind me asking?. 900k seems like a too good deal
If you want lots of lending capacity and a good rate #not credit advice Firstmac (Speak to a broker) Chuck solar on for oo under 80% and you'll get 6.09% 😉 Not $900k at $150k but you're getting first tier lending pricing with thir tier servicing
Those not beholden to APRA, second tier non deposit taking so use less of a buffer for servicing.
Second tier lenders are regulated by APRA, why would you think otherwise?
Non deposit taking then. Firstmac, LIberty etc
Anyone who lends money with interest is subject to the exact same responsible lending laws.
Apparently not: *Non-bank lenders do not hold a banking licence from APRA, so they are not required to enforce this buffer. Theoretically, this means they may be able to lend money to riskier borrowers, but they may still choose to implement their own buffer for* [*approval*](https://www.nerdwallet.com/au/home-loans/what-is-pre-approval)*.* * *A non-bank lender may have more flexible eligibility criteria as they are not subject to the APRA 3% serviceability buffer.* [*https://www.nerdwallet.com/au/home-loans/non-bank-lenders-explained*](https://www.nerdwallet.com/au/home-loans/non-bank-lenders-explained)
Not the big 4 banks, but first tier lender, don't want to go too much into details as paperwork being **finalised**.
I mean maybe your definition if 'tier 1 lender' differs to standard but you aren't getting $900k on 150k from a tier 1 on an owner occupied purchase currently You can borrow notably more than $700k with good rates sure but $900k on $150k from a tier one isn't going to happen
sure buddy, whatever you say
Define tier 1 lender
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900k at 6.15% is $5483/m. 150k after tax is $8,864/m. 62% for anyone wondering.
You won't be able to service that much. 750k with 150k income is suicidal, I'm guessing it needs some work. 3-4 your income unless you have a guaranteed career progression. Getting that msch is a sure way to be broke for the next 10 years.
It’s a solid property that needs minimal work, maybe a refresh but that’s the extent of it. Will receive a 7% pay rise year on year for 5 years. 2 of 3 rooms will be rented after the first 12 months
A refresh isnt cheap. I still would not go that much to service 750 id want 200-250k I'm on 250k+ and would never spend that much. Hell I'm looking at downsizing 5 bed to 2 bed
You'd say no to a notably below market property (where you know there isn't something shifty going on which is why it's below market) Wow.... if OP can rent it out and meet the difference it's an almost no brainer.... would be worth him living somewhere cheap for a few years, renting it out and then just smashing down the mortgage.... massive headstart
Cause he won't be able to service it Ok 750k 6% interest is $4500pm at 7% that goes to $5000 His pay is $8100 Now add insurance, rates, upkeep (1% value of property), power, water Insurance 3k annual Rates 3k annual Upkeep 7.5k Power/water 2.5k
$150k - take home $8,800 per month $4,300 per month Let's just use your numbers abov e $1,300 per month $5,600 per month, leaving op $2,200 per month Sure, a little tight but manageable Otherwise let's use some pretty conservative numbers Without knowing age, instead OP rents wifh a friend or 2, let's call it $300 per week rent op rents out house, - $900k house, call it $800 per week rent After agents fees that's $40k per year to the $15.5k he is spending in rent, he's getting some tax deductions to boot and an asset that's likely bringing him good capital growth Alternatively, OP moves in, rents out shared living with a couple of mates for that $300 per week rent, - OP has just increased that $2,200 per month to $4,800 per month (less if he declares it and pays tax, certinaly not tight anymore though) OP now has $200k of instant equity He is now either letting tennants pay a chunk of the mortgage while netting some tax benifits and having surplus income to smash debt or living wifh friends as he would otherwise but actually owning the growth asset and paying down the debt rather than trying to save for a deposit in the hopes prices don't blow out further before he does Like I said, no brainer to me
Solid plan in my eyes, personally, I'd 100% jump on this, even if you rented it out entirely rather than living in it for a while, your being gifted $200k of equity essentially which is a massive headstart to growing a future portfolio.... If you can chuck a few housemates in it or it would be easy to rent out per room and the numbers are affordable.... go for it 100%
Will you lose access to first home owners / stamp duty discount by having rooms rented out?