Half share query

[Rusky]

Hi all.

I'm just after some advice from anyone that may have been in the same predicament as myself and my partner, or have the expertise to help. We have had the opportunity to purchase a half share in a house that my in-laws own, and to buy the rest later once the first half is paid off.

The bank has pre-approved our loan, interest rate fixed, loan time frame etc, and we have got ours and the in-laws solicitors involved and were meant to have a settlement date on the the half share of the house today.

The technicality or brick wall we have encountered is that the loan agreement that me and my partner have, also has our in-laws name on the title. This means my in-law is liable for any defaults on our payments if that was to ever occur. Understandably they essentially want their name removed from the loan agreement but the bank and lawyers seem to think this is impossible as it adds security to the loan.

Is there any way we can remove their name from our mortgage and proceed with the settlement? There was talk about a caveat to remove the in-laws name from the loan but our lawyers seem to think this is impossible. We also have a guarantor (family members) who would take the responsibility of any defaults that may occur but they too have dismissed this idea saying we would need to borrow the full amount for the house which we can't financially achieve at present.

Any feedback is much appreciated as were very desperate at the moment to make this happen as we are so close to achieving our dream.


Regards,
First Home Buyer (Maybe?)

[reepr]

Not sure they can be removed, how about a clause stating that you can never increase mortgage to greater than 50% of the market value of the house. This would mean their investment is safe and if the worst happens, they can either buy you out, or sell the house and recover their portion.

[Curious]

The technicality or brick wall we have encountered is that the loan agreement that me and my partner have, also has our in-laws name on the title.

You're only buying half-share of the house, right? Understandably the in-laws will still be on the title as they still own the other half-share. (assuming you use the word "title" in the usual meaning).

Is there any way we can remove their name from our mortgage and proceed with the settlement? There was talk about a caveat to remove the in-laws name from the loan but our lawyers seem to think this is impossible. We also have a guarantor (family members) who would take the responsibility of any defaults that may occur but they too have dismissed this idea saying we would need to borrow the full amount for the house which we can't financially achieve at present.

Are the in-laws also your guarantors or not? If not and you are able to offer other guarantors I don't see why the bank wouldn't accept that. Did you talk to the bank or to your mortgage broker? The bank wants the security of repayments, they shouldn't care much where they come from...

[RTP]

As an alternative, would your in-laws be willing to sell the whole house to you, but provide vendor finance for the half share they were planning to retain?

[speights boy]

The bank wants the security of repayments, they shouldn't care much where they come from...

The bank's concern I would have thought, is how do you sell half a house as mortgagee.
Sure, there may be another guarantor for Rusky's loan, but the bank needs to be able to sell the house.
That, I would have thought, would require the in-laws (who are on the title) to also be on the mortgage.

One of our lawyers will tell us I'm sure.

[Keys]

In my situation I had to go guarantor for the daughters loan as I was 1/2 owner in the property.

[Boostin]

There are two distinct parts to the transaction.

1. The security being given is the mortgage over the property. As all parties are owners in the property, all owners will need to give a mortgage. It is highly unlikely that the bank will accept a mortgage over your half share only. As mentioned already the bank can't sell a half share at mortgagee sale without great hassle.

2. The loan agreement that is being used to advance the funds. From the sounds of it this seems to be the issue. If all parties are on the loan agreement they are all taking on the potential debt. It does not make sense to have the parents on the loan agreement as essentially they are borrowing money to sell a half share in the property. Unfortunately the banks seem to require this or for the other owners of the property to be guarantors. It doesn't seem to make much sense to me other than the banks want all the security they can get for repayments.

[Wayne]

I think SB has nailed it and that was my thought also. How would the bank sell half a house? If they have all parties on the loan agreement if one defaults then they sell the whole house.

[Rusky]

Hey guys, thanks for the replies. We have changed Lawyers now, as we have found someone that can do what we require. If it all goes to plan, I will tell you how it can be achieved.