Structuring a co-owned property for future loans

[Mattsaas]

Hey guys,

I'm looking for some advice on a property I co-own in Auckland. Myself and my partner own 50% of a property, and the in-laws own the other 50%. We have a mortgage on portion of our half, and their half is mortgage free.


Now I'm wanting to extend my mortgage to do some renovations, and the banks want to income-check the in-laws since their names are on the title. This raises the issue that if I want to buy any additional properties, and use this current home as security, the in-laws will always be imcome-checked.


Also, if I use my 50% of this current house as security for future loans, it puts their portion of this house at risk.


I've just read an article which straight up says that this sort of arrangement "severely restricts your borrowing capacity for purchase of a subsequent property", which we seem to have now realised, three years after buying the property. Doesn't help that I am 30, with a growing income, and they are 60, with a declining income.


Basically my question is, are their any straightforward ways around having them be involved in our future borrowing and investing plans? The first option that I've heard of is the in-laws "gifting" their 50% of the house to use, and we have a lawyer draft a 50/50 ownership agreement between the parties, that we file away. This way, they won't be on the title, and the banks wont income-check them.


Any feedback, insights, or different options for me to explore would be great (before I go speak to a lawyer).

Thanks,
Matt


EDIT: I should have mentioned it'll have three tenancies producing income which we would also want to split 50/50 - as per our split of ownership. They'll want to take 50% of the revenue from this property (which we are happy with), but ideally they wouldn't be income checked or involved in any future property purchases.

[Anthonyacat]

To my knowledge, their half isn't mortgage free. A mortgage is secured over the property as a whole. You may be the named borrowers, but if you default the bank won't only sell half the house, they'll take the whole thing.

It may be too simple a suggestion, but could you just advise the bank to disregard their income - ie, treat it as zero?

One potential alternative would be to sell the property to a company, with 50:50 shareholding between yourselves and them, but with only yourselves as directors.