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My most important post ever....

Discussion in 'The Pub' at netrider.net.au started by hornet, Nov 29, 2013.

  1. Recently my wife's mother passed away, and she left to Hazel and her brother her house, with instructions to him that he was to sell us his share so we could have a house of our own. We have been married for 40 years but because of my work in the ministry and always not having enough money, often just for basics, we have never owned a house.
    Hazel's brother is very happy to sell his share. He has his own house, plus an investment property, and as well is currently battling bone myloma, with a pretty gloomy prognosis, so he would love to have the money to add to his ability for his wife to be comfortable when he is gone.
    Now the problem.
    I only need to borrow a relatively small amount of money. I have a super fund with more in it than the amount of the loan I'm seeking, I have some savings, I have a full-time (although not spectacularly-paying) job, and good health. BUT, I am 64 years old, and no-one will lend me that amount of money over 20 years, and I can't afford the payments on a home loan over the ten years maximum several lenders are demanding.
    If we can't buy the house, of course, it will be sold and Hazel and her brother will share the proceeds, but that still leaves us at the worst time of our lives exposed to the vagaries of the rental market.
    Does anyone know any organisation (short of the sort of people who want your kidney as security) with whom I may be able to secure this modest loan over a 20 year period?
    I know this is probably a pretty 'out-there' request, but we've never had anything to do with the finance market, and I have no idea where to look next.

  2. First of all my condolences for your recent loss.

    Given your situation it may be a good idea to seek the services of Lending Advisor/Broker. They have access to many lending institutions and are great at negotiating terms and loan periods on your behalf to get you the loan you want.
  3. Thanks for that info Justus. Unfortunately three of the links are about using equity in an existing home; we don't have an existing home. I we manage to buy this house, it will be our first and last home.
    But the first article makes a good point; I am being discriminated against, not because I can't service the mortgage over 20 years, but because the lenders are afraid that if I get sick and can't work, they will look bad if they take most of my super to reclaim their money.....
  4. #5 hornet, Nov 29, 2013
    Last edited: Nov 29, 2013
    MarkF, thanks for the advice. We have been working through Aussie, who have access, I believe, to a wide range of lenders, and they are the people saying that they can't secure a loan from anyone for a term greater than ten years.....
    We are, however, seeing another broker tomorrow morning, so there's always the hope that she might have some different contacts or ideas.....
  5. You have equity on an existing property nevertheless. What about using your Super?


  6. There are situations where you can get your Super early. I don't know what they are but it might be worth looking into.

    Sure, much of your Super would then be gone but you also wouldn't be paying off a loan with interest and get capital in the house.

    Another possible option is to create your own self-managed super fund, transfer the super over, and use the house as an investment. Problem with that is, AFAIK, you can't live in the house. There might be a way around it.
  7. Ah, you mean half-ownership of the property in question, yes we do! But that doesn't seem to be of any interest to the people who have so far not been helpful, as I said, they seem more interested in their image than anything else.
  8. Can't you just pay your brother-in-law some rent while you save up some money to buy his half? Pretty easy to benchmark rents in the area and pay 45% of that (no agent fee). He already has an investment property so is apparently keen for income rather than cash sitting in the bank (otherwise he would have sold his investment property). I don't see why he has to sell his half at all. An alternative is that he gifts you his half, and you gift him some cash every now and then (as a rent). This second option has a heap of tax implications and might be awkward if things go pear-shaped with your ability to pay or with your relationship.
  9. Hmm.. hopefully there is a finance broker amongst us. Biker boy is one but no longer active on the forums.

  10. Hi Hornet,

    You say that you need to borrow a "relatively small amount". Maybe something like peer to peer lending could help: http://www.societyone.com.au

    Alternatively, is there any chance you could negotiate a deal with your brother-in-law where you pay him the loan payments over 20 years? He may like to have a continuing income stream as you pay it off. It can be set up with interest, variable or fixed, for whatever time suits both. A solicitor could set up the contract for not too much. This type of "vendor loan" used to be more common. My parents bought their first house this way 50 years ago. They effectively kept paying rent for 20 years and owned the home at the end of it.
    • Like Like x 1
  11. Can't help with the loan scenario, but have you looked into accessing your superannuation to purchase the property? How long until you turn 65? You can access your superannuation balance upon reaching age 65, without having to retire. Being 64, you can potentially access some or all of it already, depending on the type of fund you are in and the preservation status of your account. The withdrawal should be tax free in most cases, however there may be tax implications depending on the type of contributions made over the life of the fund.

    source: used to be a super fund accountant.

    disclaimer: have been out of the game a few years, rules may have changed but don't think so.
  12. Yes, I could do that, but the amount in my super is the amount I need to borrow, and that would leave me with no super when I retire....
  13. No super but can't you then claim the pension?
  14. Yes, I could, and eventually I probably will have to, but up till then I was hoping to be able to fund my retirement with my super.......

    Thanks everybody for the replies, as you may guess, this is a pretty stressful time and I appreciate you taking the time to share your thoughts :)
  15. Sorry to hear about the wife.

    Maybe you need to ask yourself if you really need the house.

    Maybe a 2 bedroom villa would be more appropriate for now and into the future.

    As for the banks, I found when I switched lenders, they were reluctant to lend too little. I ended up taking a larger loan than I needed then made a large first repayment. Might be a factor.
  16. Any possibility of a reverse mortgage?
    I know you have to be very careful of the terms in these contract but it would mean the bank effectively owns the other half of the property (not the mortgage to it) and would effectively charge you rent rather than interest.

    Of course if you knew someone who wanted to buy the other 50% as an investment that would be even easier.
  17. With all due respect this is the wrong approach. You should be aiming to maximise your age pension benefits - your current approach actually minimises them.

    A private home does not count towards the assets test for age pension purposes whereas at least 50% of your superannuation account balance will. ie. if you borrow to purchase the house and keep your superannuation balance as is, you will potentially receive less age pension than if you used the super to purchase the property. If you've gotta choose between the two, It makes much more sense to have your wealth tied up in the family home than it does in a super account.

    In the long run if you save the money you would have otherwise paid in mortgage repayments you'll be materially no worse off. In fact, if your super doesn't outperform the interest rate on a mortgage, you'll be better off, without even taking into account any additional age pension benefits.

    I do understand wanting to fund your own retirement, but in this case its not the best option. You need to remove emotion from financial decisions - that's what the bank is doing when they won't lend to someone who will be 85 by the time the loan expires.
    • Agree Agree x 2
  18. #19 hornet, Nov 29, 2013
    Last edited: Nov 29, 2013
    I'm going to take this information to my Aussie Home loans guy this afternoon, thank you for your insights!
    (Thinks) I can't access ALL my super without retiring, and I can't do that till March next year, in the mean time I wouldn't be able to do anything about purchasing the house, correct?
  19. I think Man Hands makes a good point. I went through this with my parents and the means test really did kick in suprisingly early and went to zero pension very quickly. It really encourages people to spend their supa, rather than fund their own retirement.

    Mind you, this was about 6 years ago, so it might be a bit better now, so check. Don't feel guilty about getting some pension. It's why you payed taxes all those years.

    Another thought, is; have you thought about an interest only lone? The banks might be more amiable to that.