How does property title under a single name may affect your future home loans?


– Hey it’s Connie from Prosperity Finance, sharing the best financial
tips so that you can be more successful with achieving
your financial goals. Now, in many occasions,
we want to own a property under our own name. Just one person name. It could be at the time
of purchase, it just us, we are single, we just
purchased the property in our own name. Sometimes there’s other
reason, for example, my life partner may not work at the time I purchase the property. Including that partner may actually affect the borrowing amount because my income need to support his or her living expenses, or sometimes there’s other reasons but, anyway, we see so many cases where, when people actually have a life partner but they choose to purchase
property under their own name. Now, it’s all fine for that transaction. But in today’s session,
I’m going to share with you how does that kind of ownership
affect future borrowing? So let’s firstly take example. So, say, Mrs. have a property. Now the current value is 800K and she only have 200K
loan on this property. Now, they are about to marry. She meet her husband and they looking to purchase
their home and rent out that property for $500 per week. Now, say that property is
worth a million dollars, okay, now they want to know
how much they can borrow, what are the options, okay. So here, I just assume
they have enough income to borrow a million dollars. But the challenge is how they can meet the LVR requirement by the bank. Firstly, let’s make one assumption. Say they have a cash of 200K. If that’s a assumption and
they only need to borrow 800K. Now, remember I said
their income is sufficient to borrow a million dollars so if they only borrow 800K, that’s fine. As long as they have 200K cash. But not everyone has 200K cash, right? So, that’s option one. Now, option two. Say, for example, they
don’t really have 200 grand and they want to borrow more than 800K. Let’s say they want to
borrow a million dollars. Obviously bank won’t lend you 100% so one way to do that is actually cross-secure both secured property, which means put them into one bank, okay? So, say, the current property
is stay with the A bank. And you borrow from A bank for a million dollars. So because they’re cross-secured, the bank actually see
the two property as one. So they have $1.8M properties and they’re going to have $1.2 loan, so 1M plus 200. So that’s okay for them because they can extend 70% on
this, which is 560K. They can extend 80% on
this, so they 800 grand. So altogether, it’s 1.56 mil. and they only borrow 1.2 mil. So that’s okay. Now the pro of this method
is that it’s simple, right? It just go to the same bank, either you refinance this to that bank, or their application is lodged
through the existing bank. But the point is they has
to be in the same bank. The cons of this approach is that you put all eggs in one basket. If anything wrong with one of the property or your repayment ability, then affect both property. Now if you follow our YouTube channel, you will see we actually recommend you split your banks as much as possible. But if that’s only option, then go for it. You can cross-secure both, okay? So that way, you borrow a
million dollars from A bank. That’s additional borrowing
on top of the 200K. So that’s a second option. Now the third option and also
is our recommended option is actually keep them separate. Okay? But you have to add mister
to this property title. Let’s draw a picture. All right. So if you add mister
to this property title, that way you can separate the loan. So the third part would be A bank top up 200 grand, so it become 400 because originally, loan is 200. So you’re going to have 400, right? And then B bank borrow 800 grand. So together, you have a million dollar to settle this property, but you actually split into two banks. The reason you have to add
mister in this case is that the bank will ask you what’s
the purpose of borrowing that 200 grand. And if you say, “I’m going
to buy another property”, then they will ask you where
the remaining funds come from. If you say, “Oh, I’m
going to borrow 800K”, then they will work out
your borrowing capacity based on your own income
and see if you can service the entire loan even though the loan is with another bank. But they have to make sure you can service all loan at the same time. So for Mrs., obviously
it’s really hard to service 200 grand, 200 grand, 800 grand, so that’s $1.2M loan. On one person, it’s quite hard but much easier if they
consider mister income, as well. So without mister, the bank won’t, unlikely to approve 200 grand just because she need to
borrow additional eight grand and her income is not enough. So the beauty of this approach that you split the banks, and you just top up the deposit you require, and borrow the remaining
80% from the second bank. So you are more flexible, you are safer, it’s a huge benefit in the long term. And you can unlock the equity from here without giving the cash deposit. The cons is that you need to actually add another person to the title and you may not want to do that for many reasons. And also, there will be
legal cost associated with doing that. We will have a session, separate to cover how to add another
person to existing property, so it’s actually quite interesting. We’re gonna share that with you, as well. But today, I just wanna talk
about the finance structure. Now let’s say they have a hundred grand cash sitting somewhere, you can still borrow a million dollar, but instead of using your own cash and when you need the
cash to do something else or for rainy days, you actually have to go to the bank to top up and they may not approve. So what you can do is, for example, you have 200 grand cash, you can still borrow a million dollar, but you put 200 grand
on a revolving facility. And 600K is our fixed term loan. So that 200 grand revolving
will be offset by 200K cash, so you’re not really paying
interest on that 200K. You’re only effectively paying rates for the 600K and that 200K. Okay? So they give you the flexibility in case you need to
access money very quickly, it’s still there. Okay? So this a perfect approach, but as I said, it’s not perfect because they involve adding
another person to the title and also there will be
additional legal cost, but we’ll give you a personalized advice and we’ll kind of show
you the pro and cons in your situation. And sometimes, we can
even refinance this loan so that cashback from the new bank probably likely to cover the legal cost for adding your partner to the title. There’s a lot of alternatives. I hope you find this video useful. If so, please feel free to share with your family and friends, and please, also feel free to
subscribe our YouTube channel ’cause every week we
have very good content to share with you. Thank you so much for watching. I’ll see you next time.

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