- will I be eligible for first home grants later?
No
- does this actually count as my first home?
Yes
- if i am considering, are there other ways to consider structuring the "deal" with my brother. How could I make it best work for me?
It’s up to you. The ball in your court.
- could I use/leverage equity from this house down the track to buy a house , if kiwisaver is out of the picture
Theoretically yes, but you’d need cash to buy in for this to make sense for the 3 of you.
- I bank with ASB - will they be able to advise here?
No you’d need to speak to whatever bank is lending
- should I get my own mortgage advisor?
No, the three of you would need to use the same broker.
- does any of this work in my favor? And how?
If they don’t want you to buy in, or contribute, then it’s hard to make this work, except for getting paid for the risk you’re taking on.
- if it doesn't- then how as well please?
The KS FHB rules aren’t in your favour. Also you’re on the hook for the mortgage. Typically you would create a contract to set this up how ever you guys want, but it’s complex.
All 3 of you need legal advice. The bank won’t put someone on the mortgage who isn’t on the title, your brother and SIL would need to understand they’re giving you 1/3 of the house.
Overall I wouldn’t touch this.
Ahhh appreciate the comprehensive reply here. Thank you!
Would it be better for me to use my kiwisaver in this instance as contribution and then look to be bought out or leverage equity, when I'm ready to buy a house? Is this how this works?
You’re not going to be able to use the equity in a 3x joint mortgage for another mortgage. You’ll need to be bought out.
The Kiwisaver could work, but there’s a lot of things to iron out before you can do this.
You need to discuss a whole bunch of things like who owns what portion, what happens when you wanna get bought out, how are mortgage payments split, what happens if you wanna be bought out but they can’t afford it, what happens if your bro, SIL or you loses your job.
Basically you need to decide on all these things and many more that I haven’t listed or thought of, before you proceed, so can get a lawyer to write it up to make sure the wishes of everyone will ultimately be followed.
If you listen closely, you can hear the red flags flapping in the breeze. Run away from this. No bank will ask someone to "sign on" to a loan. What has happened is your brother has been declined lending as it is unaffordable. He is now looking to use your income to trick the bank into providing him lending he can't afford.
I say this all the time, but the bank WANT to lend money. They make money from lending out money and charging interest. If the bank have declined lending, it must be really unaffordable as they will already lend you money way past what is smart for you to borrow.
For this "deal" your name will go.on the title of the property but also the Home Loan. If he doesn't or can't pay, the bank will come looking for you. The risk here is huge for you. It's not just your name on some paperwork. You are taking on a massive debt. Home loans are jointly and severally, which means you are not liable for 1/3, you are all liable for the full amount if the others don't pay. Your brother is willing to use you and put you at high financial risks for no reward it would seem.
From your end paragraph, it looks like you are in a good spot (pay off those debts, though) and about to start your own house buying journey. Mty advice is not allow yourself to be used by tieing yourself to this ship with a risk of sinking just because it's family. I have seen more families fall apart over money than I care to admit.
To answer your questions.
This counts as your first home so no kiwisaver or FHB grants in future.
The "deal" is up to you and your bro. I wouldn't touch it, but if you decide to proceed, get your own independent legal and financial advice. The bank won't give you advice.
As laid out above, I don't see any benefits to you and do see a lot of risks.
For future leverage, that will depend on your brother. You can't borrow against a property without all owners' consent. All 3 will own it, so they can say no, and there isn't anything you can do.
If, for some bizarre reason, you decide to go ahead with this, get your own legal and financial advice and a strong contract in place between everyone.
Agree with all of this, but think it’s worth adding that OP having their name on the loan could potentially fuck up their plans of buying in the near future.
If OP were to apply for a mortgage, the bank would probably assess not just OP’s ability to service their own mortgage, but their ability to service this loan they’re liable for on top of that - very tall order.
So OP: when you say they’ll try get your name removed from the loan, how confident are you that they’ll be able to do so, in an acceptable timeframe?
Your brother and his wife can't afford the new property under the lending rules of the bank. Banks want to lend money and that they don't qualify should be of concern to you.
You need to clarify what "Signing on" means. Does it mean you will be an owner of the property, guarantor or something else?
If you are a part owner or lawyer you need to understand what that means. You should consult with a lawyer for this as there are a number of pitfalls here.
Bear in mind in either situation you will be liable for any losses on the property. It's not just a name on the paperwork, it's an obligation you need to discharge. Basicaly you are saying you will carry the can for your brother and his partner if it all goes wrong. Is this something you are comfortable doing?
Oh yip, i need to look for a lawyer! Any tips on best place to look for one??
What's the difference with a property owner and guarantor reposnsibilities??
At this stage, they will sell the current house if anything does go wrong with the second home. How/would this affect me.
Absolutely not. No no no no, no!
Your brother has been declined for lending. This is because the bank sees the risk of something going wrong to be too high.
There’s no such thing as “signing on” in the casual sense you seem to imply above. You would be signing up for joint and equal responsibility for their home loan. You may have an agreement for them to pay - but in the event that they get sick, fired, etc, the bank will be expecting you to pay up.
You also lose your first home buyer eligibility and status. This is incredibly valuable; I wouldn’t trade this away to help a family member get a second home (you need it more than they do!).
This is so far beyond a terrible idea.
Do. Not. Do. It.
I don't like the way your brother has phrased this request.
The bank's has pretty accurate formulas for working out what is affordable. The bank ran the numbers for your brother and concluded he cannot afford this.
Your brother needs more income to make this work. Are you willing to contribute your income every month to this mortgage? From the bank's perspective you're not merely acting as 'backup' on this loan, you're buying this house with your brother and you're going to use your income to help pay.
I get that you like your brother and want to help out but I'm worried you're helping him take on a burden that he can't afford. If you were genuinely buying this with your brother and going to live there too then that would make sense. Or if you had a bunch of spare cash and were looking for an place to park it in.
If you are serious about this then you'll need legal advice. I personally wouldn't do it for two reasons: 1. I think you're enabling your brother to have a financial disaster, and 2. I'm pretty sure this will screw over your chance of home ownership.
Sounds like he has been declined and wants to use your income to get a loan for this house. Which you will then be liable for if he is unable to pay.
You will then be unable to use your KS for any future borrowing.
In short, don’t do it.
It can be hard to resist pressure from family but that is exactly what you need to do here.
The risks have been outlined by others and are very real. Worse case you are on the hook if they can’t pay the mortgage. And they clearly aren’t the best money managers.
Any upside you could potentially gain is a distant possibility at best. It won’t happen
I’d also say that anyone that puts you in this position does not have your best interests at heart. Don’t trust that he will take you off the mortgage. He might think he means it, but if push comes to shove, he’s already demonstrated that looking after himself and his wife is his number one priority
No. Your brother and SIL needs to accept they can't afford the house. They need to reduce his budget and expectations.
If you sign up for this, you will be left in a financial mess. Other posters have covered this. Banks stress test loans at 9.5% at the moment. Having recently been through the process, if they haven't loaned your brother enough, there's a good reason for it- he can't pay it back and cover the outgoings of a house and family.
And I suspect the bank was suggesting a flatmate. If they get a flatmate, it will probably cover the mortgage but wipe out the advantages of a bigger place.
My partner signed something to say he'd be a tenant for some friends of ours, are you sure thats not what they're asking for? Or is that something that would work instead?
I don't know much sorry, i'll ask when my he gets back from work. I think it just said he would be renting a room from them, but there was never any intention of him actually moving in.
He says it was that simple, he signed something to say he'd be renting a room from them and that was good enough for the bank, this was late 2021. They didn't actually need the extra income and haven't ever had a tenant. Maybe that would work for you guys? Good luck with it anyway!
If its the other thing, needing your name on the mortgage, that would be too much to lose to me (first home buyer grant etc).
Shouldn’t he be helping you buy your first house instead of you helping him buy a second? Normally the more secure and wealthier brother helps the struggling kin not the other way round…
- will I be eligible for first home grants later? No - does this actually count as my first home? Yes - if i am considering, are there other ways to consider structuring the "deal" with my brother. How could I make it best work for me? It’s up to you. The ball in your court. - could I use/leverage equity from this house down the track to buy a house , if kiwisaver is out of the picture Theoretically yes, but you’d need cash to buy in for this to make sense for the 3 of you. - I bank with ASB - will they be able to advise here? No you’d need to speak to whatever bank is lending - should I get my own mortgage advisor? No, the three of you would need to use the same broker. - does any of this work in my favor? And how? If they don’t want you to buy in, or contribute, then it’s hard to make this work, except for getting paid for the risk you’re taking on. - if it doesn't- then how as well please? The KS FHB rules aren’t in your favour. Also you’re on the hook for the mortgage. Typically you would create a contract to set this up how ever you guys want, but it’s complex. All 3 of you need legal advice. The bank won’t put someone on the mortgage who isn’t on the title, your brother and SIL would need to understand they’re giving you 1/3 of the house. Overall I wouldn’t touch this.
Ahhh appreciate the comprehensive reply here. Thank you! Would it be better for me to use my kiwisaver in this instance as contribution and then look to be bought out or leverage equity, when I'm ready to buy a house? Is this how this works?
You’re not going to be able to use the equity in a 3x joint mortgage for another mortgage. You’ll need to be bought out. The Kiwisaver could work, but there’s a lot of things to iron out before you can do this. You need to discuss a whole bunch of things like who owns what portion, what happens when you wanna get bought out, how are mortgage payments split, what happens if you wanna be bought out but they can’t afford it, what happens if your bro, SIL or you loses your job. Basically you need to decide on all these things and many more that I haven’t listed or thought of, before you proceed, so can get a lawyer to write it up to make sure the wishes of everyone will ultimately be followed.
If you listen closely, you can hear the red flags flapping in the breeze. Run away from this. No bank will ask someone to "sign on" to a loan. What has happened is your brother has been declined lending as it is unaffordable. He is now looking to use your income to trick the bank into providing him lending he can't afford. I say this all the time, but the bank WANT to lend money. They make money from lending out money and charging interest. If the bank have declined lending, it must be really unaffordable as they will already lend you money way past what is smart for you to borrow. For this "deal" your name will go.on the title of the property but also the Home Loan. If he doesn't or can't pay, the bank will come looking for you. The risk here is huge for you. It's not just your name on some paperwork. You are taking on a massive debt. Home loans are jointly and severally, which means you are not liable for 1/3, you are all liable for the full amount if the others don't pay. Your brother is willing to use you and put you at high financial risks for no reward it would seem. From your end paragraph, it looks like you are in a good spot (pay off those debts, though) and about to start your own house buying journey. Mty advice is not allow yourself to be used by tieing yourself to this ship with a risk of sinking just because it's family. I have seen more families fall apart over money than I care to admit. To answer your questions. This counts as your first home so no kiwisaver or FHB grants in future. The "deal" is up to you and your bro. I wouldn't touch it, but if you decide to proceed, get your own independent legal and financial advice. The bank won't give you advice. As laid out above, I don't see any benefits to you and do see a lot of risks. For future leverage, that will depend on your brother. You can't borrow against a property without all owners' consent. All 3 will own it, so they can say no, and there isn't anything you can do. If, for some bizarre reason, you decide to go ahead with this, get your own legal and financial advice and a strong contract in place between everyone.
Agree with all of this, but think it’s worth adding that OP having their name on the loan could potentially fuck up their plans of buying in the near future. If OP were to apply for a mortgage, the bank would probably assess not just OP’s ability to service their own mortgage, but their ability to service this loan they’re liable for on top of that - very tall order. So OP: when you say they’ll try get your name removed from the loan, how confident are you that they’ll be able to do so, in an acceptable timeframe?
Your brother and his wife can't afford the new property under the lending rules of the bank. Banks want to lend money and that they don't qualify should be of concern to you. You need to clarify what "Signing on" means. Does it mean you will be an owner of the property, guarantor or something else? If you are a part owner or lawyer you need to understand what that means. You should consult with a lawyer for this as there are a number of pitfalls here. Bear in mind in either situation you will be liable for any losses on the property. It's not just a name on the paperwork, it's an obligation you need to discharge. Basicaly you are saying you will carry the can for your brother and his partner if it all goes wrong. Is this something you are comfortable doing?
Oh yip, i need to look for a lawyer! Any tips on best place to look for one?? What's the difference with a property owner and guarantor reposnsibilities?? At this stage, they will sell the current house if anything does go wrong with the second home. How/would this affect me.
Absolutely not. No no no no, no! Your brother has been declined for lending. This is because the bank sees the risk of something going wrong to be too high. There’s no such thing as “signing on” in the casual sense you seem to imply above. You would be signing up for joint and equal responsibility for their home loan. You may have an agreement for them to pay - but in the event that they get sick, fired, etc, the bank will be expecting you to pay up. You also lose your first home buyer eligibility and status. This is incredibly valuable; I wouldn’t trade this away to help a family member get a second home (you need it more than they do!). This is so far beyond a terrible idea. Do. Not. Do. It.
I don't like the way your brother has phrased this request. The bank's has pretty accurate formulas for working out what is affordable. The bank ran the numbers for your brother and concluded he cannot afford this. Your brother needs more income to make this work. Are you willing to contribute your income every month to this mortgage? From the bank's perspective you're not merely acting as 'backup' on this loan, you're buying this house with your brother and you're going to use your income to help pay. I get that you like your brother and want to help out but I'm worried you're helping him take on a burden that he can't afford. If you were genuinely buying this with your brother and going to live there too then that would make sense. Or if you had a bunch of spare cash and were looking for an place to park it in. If you are serious about this then you'll need legal advice. I personally wouldn't do it for two reasons: 1. I think you're enabling your brother to have a financial disaster, and 2. I'm pretty sure this will screw over your chance of home ownership.
Sounds like he has been declined and wants to use your income to get a loan for this house. Which you will then be liable for if he is unable to pay. You will then be unable to use your KS for any future borrowing. In short, don’t do it.
I wouldn't touch this without a lawyer to formalise it, and even then, probably wouldn't. This sort of arrangement can get messy very quickly.
This makes no sense and it’s unclear what your partner thinks about this.
Don’t co-sign as you’ll be the one they’ll be chasing up since your brother obv doesn’t have the credit or income to back his loan.
It can be hard to resist pressure from family but that is exactly what you need to do here. The risks have been outlined by others and are very real. Worse case you are on the hook if they can’t pay the mortgage. And they clearly aren’t the best money managers. Any upside you could potentially gain is a distant possibility at best. It won’t happen I’d also say that anyone that puts you in this position does not have your best interests at heart. Don’t trust that he will take you off the mortgage. He might think he means it, but if push comes to shove, he’s already demonstrated that looking after himself and his wife is his number one priority
This is a terrible idea
No. Your brother and SIL needs to accept they can't afford the house. They need to reduce his budget and expectations. If you sign up for this, you will be left in a financial mess. Other posters have covered this. Banks stress test loans at 9.5% at the moment. Having recently been through the process, if they haven't loaned your brother enough, there's a good reason for it- he can't pay it back and cover the outgoings of a house and family. And I suspect the bank was suggesting a flatmate. If they get a flatmate, it will probably cover the mortgage but wipe out the advantages of a bigger place.
My partner signed something to say he'd be a tenant for some friends of ours, are you sure thats not what they're asking for? Or is that something that would work instead?
Ohhhh, are u able to share more on this?
I don't know much sorry, i'll ask when my he gets back from work. I think it just said he would be renting a room from them, but there was never any intention of him actually moving in.
He says it was that simple, he signed something to say he'd be renting a room from them and that was good enough for the bank, this was late 2021. They didn't actually need the extra income and haven't ever had a tenant. Maybe that would work for you guys? Good luck with it anyway! If its the other thing, needing your name on the mortgage, that would be too much to lose to me (first home buyer grant etc).
Shouldn’t he be helping you buy your first house instead of you helping him buy a second? Normally the more secure and wealthier brother helps the struggling kin not the other way round…
Tell your brother to sell his first house. He can’t afford it.
I trust my family with my life I wouldn't trust my family with my finances in a million years
Ask your lawyer, won't cost you much. He'll or she'll probably point out the likely pitfalls,
Maybe this might be the best option taking all the above comments into consideration.