Samer came to us for advice on her next property move.
Should it be a sale and upgrade, an upgrade with the current home kept as an investment property, build from scratch, or a knock down rebuild on the current block?
Whilst significant equity was available in her current property, it soon became clear that due to the ownership and borrowing structure – Samer and her parents as owners in equal shares across their two homes – there would be large Stamp Duty and Capital Gains Tax (CGT) costs involved in pursuing any option – upwards of $50K in the worst case scenario!
These impacts had not been explained when the structure was set up, so to say they were an unpleasant surprise is an understatement indeed!
As discussions progressed, it became clear that all involved had the mutual goal of changing the ownership structures so that each party’s home would be held in their own names only. With Mum and Dad both retired, Samer also expressed a desire to see them mortgage free in the future.
After seeking accounting advice on the CGT and stamp duty issues, we were able to devise a plan to transition the borrowing and ownership structures, whilst minimising the tax impacts to all parties, and allowing Samer to move forward with her plans for the purchase or construction of her next property.
And here’s the big bonus – remember all that equity?
We didn’t waste the opportunity to put it to work!
Taking into account Samer’s position as a borrower on both properties already, and exploring lender’s credit policies on acceptable loan structures, we were able to:
- Pay off the remaining mortgage over the parents property, giving them their home unencumbered – without increasing the total borrowings against Samer’s name
- Significantly reduce the financial risk for the parents by moving them from borrowers over two properties to security-only guarantors over a single property, with a 12 month plan to release them completely
- Reduce the overall repayments compared to what had been previously required across both loans
Here’s what Samer had to say about her experience:
“Kim I just want to thank you from the bottom of my heart for all your help with this refinance. You have no idea how much this means to me and my entire family. I’m also on a path to secure my financial wellbeing which is so freeing. Thanks again”
Samer Fouani, St Andrews NSW, February 2016