Hypothetical Situation

[johnnyg]

Hello all, just thought I'd run this Hypothetical Situation and get some thoughts and ideas.

Mr Smith has a 180K housing loan which is due to come out of a fixed interest loan (which was 7.69% for 3 years) around April. He has around 20K in savings.

Mr Smith is considering his options for when his loan comes out of the fixed rate. He is undecided whether to re fix for another say 3 years, perhaps fix 50% and leave the other 50% @ a variable rate or leave the full amount at a variable rate.

Current Variable rates ~ 5.95% and 3 year Fixed rate anywhere from 6.5% to 7.5%. This is without any further interest rate rises between now and then.

Mr Smith has a female friend of a few years, Miss Brown who has ~ 50K in savings. The pair have been looking around for a 1st Home for Miss Brown, which after the initial 6-12 months would be rented out as an Investment Property.

They are looking for properties which they would be able to Positive Gear (80% LVR) or at least get close to. These houses are around in their area, however nothing as of yet has met the criteria.

The above situation would be ideal, however together they have been thinking that with more possible interest rates in the future, it may be more practical if a suitable house isn't found by the end of April to pay 40-50K off Mr Smith's mortgage and really hook into paying it off within ~ 5 years.

Why not pay 50K off Mr Browns mortgage and then if the right house comes along re-finance? Could always be done, but they then doubt Miss Browns eligibility for the First Home Buyers Grant (7K for the house and No Stamp Duty) as they couldn't really go shuffling that amount of money back and forwards without raising suspicion.

Be interested to hear thoughts/ideas and opinions. If there are more questions that need to be asked, go ahead, I have the book with this story in it close by to me at most times.

Cheers.

 

[johnnyg]

Guess No one has any input, anyways I'll continue my monologue.

I was thinking that if Miss Brown was to chip in $50000 towards Mr Smiths loan although this will cause her to no longer be eligible for the First Home Buyers Grant which theoretically could be worth up $12000 the benefit of not paying say 7.5% interest on that $50000 would equate to a saving of ~ $4000 p.a. 3 years and the theoretical loss of the FHB grant would be covered, perhaps even quicker if I.R's raise.

 

[johnnyg]

Hah no worries nun, sent off an email with all contact info to your email in your signature.

 

[Buckfont]

Hey Nun, you could help miss Brown out by redirecting all the $399.95. cheques from your 1234 PO box. I`m sure she would then come around and sip a red or 3.

 

[nunthewiser]

Oh bugger i rremoved my original post as i was just being a goose and didnt want to trash JG,s thread after re-reading it

i removed it b4 these replies so now it looks weird , is there a "put a deleted post back button " ?

 

[tech/a]

For IPs I use Variable interest only.
Interest is tax deductible as is much everything else.
Grab the first home owners grant.

Importantly your house is in your name and Your Girlfriends IP I presume in hers.
If there is a break up in a few years in joint names it will end in tears.

Your options are pretty clear.
Find an accountant who SPECIALISES in Property Investments.

 

[SM Junkie]

I don't think it would be a wise move for Miss Brown to invest in another persons asset. Talk about asking for a whole heap of trouble should the friendship sour. Even with a legal agreement Mr Smith may need to sell the property in order to repay Miss Brown if she withdrew.

Recommend independent legal advice and a financial planner to work through options.

 

[johnnyg]

SM Junkie, Mr Smith and Miss Brown are in a relationship, and have been for ~6ish years. Both get on very well and getting engaged will happen sooner rather then later.

Tech, I'm sure it'll almost always end in tears, but keeping their assets separate (considering the relationship their in) seems like it'll be non-benefiting for either.

Problem with the FHBG is that once they ' announce ' that their together Miss Brown is no longer eligible it. Which is where the dilemma comes in, eg

Stay as it is now, keep the possibility open for 12K in grants from the Government.

Knock 50K off, save ~4K a year in interest, pay the home loan off quicker, Borrow in both names for an IP, tax deductions/ect but lose 12K in grants from the Government.

That's why I was looking for possible opinions/other options that may be suitable.

 

[tech/a]

SM Junkie, Mr Smith and Miss Brown are in a relationship, and have been for ~6ish years. Both get on very well and getting engaged will happen sooner rather then later.

Tech, I'm sure it'll almost always end in tears, but keeping their assets separate (considering the relationship their in) seems like it'll be non-benefiting for either.

Problem with the FHBG is that once they ' announce ' that their together Miss Brown is no longer eligible it. Which is where the dilemma comes in, eg

Stay as it is now, keep the possibility open for 12K in grants from the Government.

Knock 50K off, save ~4K a year in interest, pay the home loan off quicker, Borrow in both names for an IP, tax deductions/ect but lose 12K in grants from the Government.

That's why I was looking for possible opinions/other options that may be suitable.

Actually I'm speaking with some experience.
My Daughters in the middle of a breakup involving a friend and joint house.
something they bought without daughter consulting the old man.

The FHOG is being handled in the settlement and is being paid by the other party as part of the settlement.

Look joining forces can be a great idea but all aspects need to be considered.
if all are eyes open and a written agreement is in place then investigate further.

 

[SM Junkie]

Plan for the worst, hope for the best.

I have a post-nup in place to protect both parties. I'm possibly further down the track than your hypothetical couple - 7 years together, then kids, then marriage. I brought significant assets to the relationship and my partner had nothing at the time.

To me I have looked after my partner better and more fairly by having an agreement done when everything is great. If not perhaps I would screw them for every cent if the relationship were to break down, who knows.

I think people that don't have one these days and they bring assets into a relationship are playing a huge gamble.

 

[johnnyg]

Thanks for the input guys, Ill take it on-board and see how I go.