Students buying a house

[Vdoubleyou]

Hi all,

I have a question for any of you who happen to know.

Next year I am intending to go back to polytech and study (I currently work full time).......my brother and his wife are currently doing degree's and what we were thinking of doing is buying a house instead of renting. By the end of the year we will have a 10% deposit saved for a $120,000 house. When we are studying we will each recieve the maximum student allowance ($150 each x 3 = $450) and Also be working part time.....pulling in another $75 a week each minimum......this would bring out total weekly income to $675.

What I would like to know is if a lender would lend to students in a situation like this?

Thanks, any advice appreciated,

Scott

[donna]

Welcome to Pt Vdoubleyou. There are many wise and knowledgeable members on this forum so I have no doubt you will be well informed a few days from now.

Rae - will definitely have an angle on this for you - I'll send her a private message to view your post.

Cheers,

Donna

[drelly]

Don't tell them... buy it before you become a student. As long as you're sure you can afford it.

[Marcus]

Hi Scott, welcome to the forum,

Don't tell them... buy it before you become a student. As long as you're sure you can afford it.

Sounds nice in theory.
But...Beware of the fine print in your loan agreement with the bank. Should they learn of your misleading them things could get ugly.
Be interesting to hear what Rae has to say about the "sneaky tact".

The banks may allow you three to buy anyway. They may want 3 PG's though.

What structure are you planning to buy in?

Regards,
Marcus.

[Vdoubleyou]

Thanks for the welcomes I used to hang out on housemouse a little, but that pretty much died, it's good to find an active NZ property forum.

Perhaps I could buy now before I become a student...........and then when I become one inform them of that and hopefully they shouldnt take the house away

Marcus, I'm pretty new to the whole structure thing (actually property at all) But from what I have read a LAQC wouldnt be a bad idea because there are 2 parties going in together and we can then have half ownership of the LAQC each. Any advice would be appreciated.

btw, what are 'PG's' ?

Scott

[drelly]

An LAQC is only any useful if you run the property as a business. The idea being that you can offset losses in the company against your personal income. As you're intending to live in it yourself, I'd say it would be difficult to convince the IRD that there's any business interest there. Ask them about it on a friday. I hear they like a laugh on fridays!

[inzvestor]

Hi Scott

I assume Marcus is referring to Guarantors (Property Guarantors)

Whangamata is a lovely area. I know a few people down that way !
Property prices have risen sharply there in the past few years.

Welcome to PT and glad you have found the most active property forum in NZ.

[orion]

They may want 3 PG's though.

I think he will be meaning personal guarantees.

Regards
Graeme Fowler

[Vdoubleyou]

drelly, I might try ringing the IRD then......

Inzvestor, Yeah prices over the last 6 months in Whanga have been crazy! They have slowed some now though..........one day maybe I'll own here, but not in the meantime!

So what is the recommended structure to purchase in?

Thanks,

Scott

[donna]

Not sure about what structure is suitable for you - but it would be a good idea to buy the property as "Tenants in Common" rather than the default "Joint Tenants".

Tenants in Common means that you own a share of the property and should you die then your share passes onto your estate.

Joint Tenants means that if you die your share passes onto the other owners of the property - so your estate (beneficies of your Will) miss out.

Worth thinking about!

Cheers,

Donna

[Marcus]

Quote;
They may want 3 PG's though.

I think he will be meaning personal guarantees

Yup.

[Vdoubleyou]

Wow, thanks Donna! That's quite interesting! A good idea.........although I hope I'm not dying anytime soon!

Scott

[Rae]

Hi there,

With the income shown in your original question, it is unfortunately highly unlikely the banks will loan based on that level of income.
The reason being there are living costs associated with bringing in that income & along with educational fees, there simply would not be enough deposable income in the banks eyes to service the loan.

In regards to taking the "sneaky tact" you do not need to disclose to the bank that you intend to be a student next year as the loan application would based on the here and now,
For example, a person could state on their application that they are to be promoted and their salary doubled, the bank does not consider this increase in income whilst assessing the loan until it happens, therefore the opposite should apply.

My advice to you is to purchase the property whilst you are in full-time employment but ensuring that the repayments are achieveable should your circumstances change.
With ownership of this property it would need to be in your name alone, and then a private agreement arranged by your solicitor to reflect the share contribution between you, your brother and sister-in-law.

We could also work your Mortgage structure to your advantage, by putting 75% on the loan on interest only, it would minimise your payments until you finish your studies.

Regards
Rae

[Marcus]

Thanks for clarifying that Rae.

Could the same be applied to owner occupied vs rental with no consequences? Say for example suggesting the property will be owner occupied to get 95% borrowing, and then deciding to rent it out post settlement?

Regards,
Marcus

[Vdoubleyou]

Thanks Rae and others for your replies, now I'll keep saving up this deposit and keep my eye open for some good property

Scott