To be clear, it is legal to buy a property in the name of a minor (someone under the age of 18). The Title Deed will simply note that the owner is a minor.
They have parents willing to sell their home to them, usually with a bit of a discount. This means the property sells for less than market value. This is called a favourable purchase. It's legal but there is a catch: the government expects the buyer to pay stamp duty on the market value of the property.
Can You Give Real Estate as a Gift? Under Australian law, you can give real estate to a relative as an outright gift. When giving ownership to a third party, there is no exchange of money. The gifting process involves filing a Transfer of Land with your title office.
The bank wants to know that your guarantor will not be a risk and be able to make repayments if you default on the loan. Can I use my parent's equity as a deposit for a house? Yes, as long as you have your parents' permission! The equity in their home can help you pay the deposit on a house.
As tenants in common, you can choose how you divide the mortgage, whether 50/50, 60/40, 75/25, or some other ratio. In case you both decide to part ways in the future, one partner can offer to buy out the other's share in the property.
Buying a home is an important goal for many Australians, and parents can be keen to lend a hand to help their adult children buy a first home. Two common ways that parents or other family members help out older children is by giving them cash for a deposit or acting as a guarantor for their loan.
With a split loan, you can get the most out of the features and benefits that are most important to you. While a portion of your home loan is fixed, you would be protected if interest rates rise (however, you wouldn't benefit from a drop in interest rates), and you'd always know what your repayments will be.
Using a parent's home equity as collateral for a mortgage qualifies as a parent-assist home loan. They can also take out a home equity line of credit when the interest rates fall into the favourable category.
Financial assistance in purchasing a home can also be more direct. In this case, parents may gift or privately loan their children some money. Alternatively, they might also act as their guarantor in a guarantor loan. Many parents choose to loan or gift their children an amount to buy a home.
The majority of parents give their children cash as a gift to make up the difference in their deposit and increase their borrowing power. This is so they can get a better mortgage deal and/or borrow more. Most banks will accept a gifted (or partially gifted) deposit.
You can give ownership of your property to a family member as a gift. This simply requires filling out the necessary paperwork with your state revenue office and title office, including a transfer of land. Your conveyancer may advise you to organise a deed of gift as well.
By law you have to notify Centrelink within 14 days of any changes to your circumstances that may affect your pension. This includes taking out loans, gifting assets or moving out of your home.
The process of transferring a mortgage to one person usually involves an interview and consultation with a solicitor, and you might have to have your property revalued. There's likely to be admin and legal fees, and possibly stamp duty if you're making a substantial payment to the other joint owner.
So when it comes to selling the property, you can declare a cost base of $1 if you wish and the Tax Office would love you.
If a property is advertised with a price, the advertised price cannot be less than the estimated selling price in the agency agreement. If you have an open house and the agent provides information regarding the price, again it cannot be less than the estimated selling price in the agency agreement.
Yes, you can buy equity in your parent's house. It's known as a 'home equity buyout' where you purchase a portion of the equity in their home in exchange for a stake in the property. You must agree on the terms, such as the price of the equity stake, payment terms, and ownership percentages.
Speaking of tax, it is worth noting the Australian Tax Office generally does not impose tax on gifts and inheritances. However, if the loan was provided for an income-generating activity, the borrower may be liable to pay tax on any profit resulting from the loan.
Protecting a gifted deposit – Declarations of Trust
A Declaration of Trust sets out in writing and in detail the contributions of each of the parties, and can also set out what is to happen to the money when the property is sold.
The bottom line
For you, the benefit may be a lower interest rate or more generous terms than you could get from a financial institution. If everyone agrees — in writing — on the loan's terms and any parental expectations, accepting the money can be a smooth experience.
Ownership structure
There are 2 ways you can buy a house in tandem with your parents: you can be tenants-in-common or joint tenants. Tenants-in-common. This is the more popular arrangement and allows you and your parents to divide ownership of the property in whatever way you like, such as 60:40 or 70:30.
The parental loan is managed by a third party lender, with interest calculated at half the rate of the home loan. This enables first home buyers to buy a home, without a deposit. If parents lend 20% of the property's purchase price, buyers can also avoid paying for lenders mortgage insurance (LMI).
Parents are of course the most common group to go guarantor on home loans for their children. However, different banks and lending institutions have different criteria to assess who can act as a guarantor. Typically, a guarantor will need to be a legal guardian or close family member over the age of 18.
Tenants in Common
This allows all those named on the mortgage can own legally different shares of the property – equity does not have to be shared equally. For example, you could have 70% equity in the property and your co-owner could have 30%.
Many borrowers like to split the loan 50:50, but you can split it in a different way. For example, if you prefer the security of a fixed rate home loan but want to make full use of an offset account, you might prefer to split your loan into something like 80% fixed and 20% variable.
Current Rate Over Split Amount: Current Rate Over Split Amount is the interest rate applied to the principal amount. If a split amount is used, this rate applies to the principal that is greater than the split amount.