Bank­ing: Effie Zahos

Money Magazine Australia - - CONTENTS -

Mort­gage broker Michael Sal­iba, from Smart­line Per­sonal Mort­gage Ad­vis­ers, says there are two ways to set up a loan ar­range­ment be­tween par­ents and chil­dren. Both in­volve us­ing a so­lic­i­tor to draw up a doc­u­ment, which would cost be­tween $1500 and $2500.

1. Par­ties en­ter into a loan ar­range­ment se­cured by a sec­ond mort­gage – usu­ally this is on the home of the first mort­gagee (the child). Ap­proval would be re­quired by the first mort­gagee, who would need to en­sure they have enough eq­uity in the prop­erty. If there is, there are small charges for pro­duc­ing a ti­tle and listing the new en­cum­brance on it.

2. A higher-risk op­tion would be to cre­ate a caveat on the ti­tle in the names of the par­ties lend­ing the money, though this of­fers less se­cu­rity to them from a le­gal stand­point as the mort­gagee would have all rights to the prop­erty if the ini­tial loan was not man­aged and the prop­erty went into fore­clo­sure. There is the po­ten­tial here for the par­ents to lose their money com­pletely and they would then have to pur­sue the amount through the courts.

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