How much can you borrow if 'gifted' house deposit

[Sheryn]

Can SS formites see anything wrong with below idea?


Scenario...
Retired elderly parents (part pensioners) and the eldest brother are exploring the options of 'gifting' money to youngest son/brother so that he can use the money as a deposit for a PPOR.

The idea is to gift 10K each in June and then another 10K in July (different financial years). Total 60K. Eldest son will be speaking to his accountant shortly

Question...
How much can the youngest brother borrow with 60K 'gifted' deposit?

[He would earn about 38-40K per year and his wife works part time 2 days per week. Dependants 2 x primary school children.]

PS
Youngest brother knows nothing about this idea as yet.

Other family members are supportive of 'gifting' idea so their will be no resentment or jealousy a gift is a gift.


Cheers
Sheryn

 

[porp_e]

In my experience with the big four (partner and I used part of an inheritance for deposit on house purchase this year) you need a minimum of 5% of the purchase price in 'genuine savings' as part of your deposit, so even with a large gifted deposit he'll still need to demonstrate he has saved 5% himself.

 

[Kristine..]

Hi Sheryn

Not a problem. The Genuine Savings requirement only applies if mortgage insurance is involved

As the recipient seems to be a relatively low income earner the borrowing capacity will not be all that high, so the proposed $60,000 plus FHOG (if applicable) and Stamp Duty concessions should be able to buy a modest family home

Lucky man to have such a loving family!

cheers
Kristine

 

[Sheryn]

Great we won't get him in more debt than he can manage.


Regards
Sheryn

 

[alexlee]

Great we won't get him in more debt than he can manage.

How do you know how much debt he can manage?

 

[pennyk]

just also check any implications for your parents in terms of pensions etc... if they are not giving him assets, there may be no problem. But I'd check it out as well.
Pen

 

[jaycee]

How do you know how much debt he can manage?

she's not talking about someone she just met on the strreet and had a 5 minute conversation with...... credit her with a little bit of common sense !

 

[Sheryn]

How do you know how much debt he can manage?

I don't know how much debt he can manage but he has been paying rent in a capital city for quite a few years so that is an indication that he can at least manage that amount as a house repayment.

We are exploring/researching all possibilities before the offer is made as I don't believe one should create and expectation and disappoint by not delivering.

After all charity starts at home.



Regards
Sheryn

 

[Sheryn]

just also check any implications for your parents in terms of pensions etc... if they are not giving him assets, there may be no problem. But I'd check it out as well.
Pen

Thanks Penny - it will be cash (which is an asset) we expect parents pensions will be reduced somewhat which is fair enough.


Cheers
Sheryn

 

[alexlee]

I don't know how much debt he can manage but he has been paying rent in a capital city for quite a few years so that is an indication that he can at least manage that amount as a house repayment.

Except for a PPOR there are repairs, rates, insurance, etc.

The other question is whether he will feel 'trapped' by the PPOR, especially if it's something family pushed him into buying.

 

[Sheryn]

Except for a PPOR there are repairs, rates, insurance, etc.

The other question is whether he will feel 'trapped' by the PPOR, especially if it's something family pushed him into buying.

Past history...
Younger brother asked parents for a lend of a deposit back in about 2000 when FHOG was doubled to 10K for old house and 14K for a new house, they said no. At this time I rang my parents and said lend/give him the money as it was about 13K he needed then.

Since the year 2000 our parents are 10 years older, eldest brother has reached his own savings goal and retired and houses have gone up & up and younger brother has had to move rental houses twice as renals sold and each time he has ended up further away from his work which increases travel time and petrol costs and also further away from his wife's family.

I suspect my elder brother didn't support original request for loan back in 2000and he now can see how much houses have gone up. Elder brother is the one who came up with the current idea and he has been thinking about different ways and checking the prices of houses and land content.

My role is as a sounding board but I did want to know how much someone can borrow in $ terms if they have a 60K deposit and earn 38-40K per year with 2 dependant kids and a wife who works part time 2 days per week?

I will discuss that 'maybe younger brother can't afford to buy a house in the suburb he is living in' and he is better off renting etc.

We won't push him to buy PPOR and we will ensure he is not over extended.


Regards
Sheryn

 

[marg4000]

Thanks Penny - it will be cash (which is an asset) we expect parents pensions will be reduced somewhat which is fair enough.
Cheers
Sheryn

So long as your parents adhere to the Centrelink gifting "rules" of $10K per year with a maximum of $30K over 5 years their pension should not be affected. The procedure you outlined in your original post sounds as if it will be within the guidelines.

However, it certainly would not hurt to check before taking any action.
Marg

 

[Ed Barton]

Past history...
Younger brother asked parents for a lend of a deposit back in about 2000 when FHOG was doubled to 10K for old house and 14K for a new house, they said no. At this time I rang my parents and said lend/give him the money as it was about 13K he needed then.

Since the year 2000 our parents are 10 years older, eldest brother has reached his own savings goal and retired and houses have gone up & up and younger brother has had to move rental houses twice as renals sold and each time he has ended up further away from his work which increases travel time and petrol costs and also further away from his wife's family.

I suspect my elder brother didn't support original request for loan back in 2000and he now can see how much houses have gone up. Elder brother is the one who came up with the current idea and he has been thinking about different ways and checking the prices of houses and land content.

My role is as a sounding board but I did want to know how much someone can borrow in $ terms if they have a 60K deposit and earn 38-40K per year with 2 dependant kids and a wife who works part time 2 days per week?

I will discuss that 'maybe younger brother can't afford to buy a house in the suburb he is living in' and he is better off renting etc.

We won't push him to buy PPOR and we will ensure he is not over extended.


Regards
Sheryn

you've used gifting in inverted commas. is it a no/low rate loan or an advance on inheritance?

 

[Sheryn]

Marg
Great I didn't know there was a 30K over 5 years limit, that is good news, even better to find out that possibly no alteration/reducton to pension.

Ed
Gifted money, not a loan.

Not really an advance on inheritance just a helping hand now. I suspect that my youngest brother earns a lot less than our kids who have their own PPORs'.

More like charity starts at home and making sure brother can have a leg up as he is 45 and still renting.



Regards
Sheryn

 

[ashalim]

I dont mind to be still renting when i'm 45...of course I'm planning to have a $5 mill asset base by then

 

[Macca]

Hi Sheryn,

I am no expert but as I read the gifting rules, at worst, money gifted is continued to be counted as an asset, so their pension shouldn't be any less than it is now.

If they claimed they had less money after gifting and sought a pension increase they may be refused while the cash was counted as an asset.

It used to be $10k per year with a maximum of $30k over 5 years, so assuming that is still right then they should be fine.

Perhaps a holiday job to trawl the pension website to check current rules.

ps: I hope the coming wet weather doesn't cause to many probs in your area. Forecast is very wet.

 

[Sheryn]

Hi Sheryn,

I am no expert but as I read the gifting rules, at worst, money gifted is continued to be counted as an asset, so their pension shouldn't be any less than it is now.

If they claimed they had less money after gifting and sought a pension increase they may be refused while the cash was counted as an asset.

It used to be $10k per year with a maximum of $30k over 5 years, so assuming that is still right then they should be fine.

Perhaps a holiday job to trawl the pension website to check current rules.

ps: I hope the coming wet weather doesn't cause to many probs in your area. Forecast is very wet.

It is good that pensions will stay the same and I will check out Centrelink website.

As for wet weather it is pouring and has poured rain for days. Boxing Day will see us head off most likely in the rain to go bush camping for a week.


Merry Christmas
Sheryn

 

[Bradsdad]

As mentioned previously, an 80% lend shouldn't be an issue. If this equates to a purchase price too low (and servicing allows) an option would be for the initial gifts to be done at least 3 months prior and these funds placed on a term deposit in his name. Then as long as the initial gifts were 5% of the purchase price, you would have genuine savings evident.

Regards
Steve

 

[Sheryn]

Elder brother has spoken to his accountant who suggested he give the deposit to our younger brother, as much easier as he can give deposit when needed and hopefully earlier than June & July.

Hmmmmmmmm...
He is thinking about it as it is a big step to go from gifting 20K to 60K and realistically elder brother understands that 60K may not be enough for a decent house deposit.

Decent house meaning one that does not need repair/reno as younger brother as a history of pulling things apart and half putting back together eg, old falcon (motor & body), 2 motor bikes, a trailer, computer stuff etc. which reduces their value significantly.

I have started another thread to research areas
http://www.somersoft.com/forums/showthread.php?p=748458#post748458



Cheers
Sheryn

 

[Sheryn]

Elder brother is extremely generous!

Update


My elder brother has worked out he needs to give our younger brother 150K for a deposit to buy a PPOR and to keep his repayments down to about $350 a week which is the current money younger brother pays in rent.

Elder brother's accountant has suggested he asks the younger brother and his wife to sign a 20 year no interest loan as a safe guard in case the younger brother's wife decides in the future to divorce or separate.

My elder brother's only wish is that the money stays in our family for the benefit of younger brother as it is a large gift.

Would anyone know of another way besides a no interest loan to ensure the money stays in the family?


Thanks
Sheryn