Oftentimes a client in a relationship will have owned a property prior to entering the relationship. When doing new lending the following are options for how that lending will impact the previous property:
Let’s say Jenny and Joe are in a relationship and Jenny owned her own house prior to meeting Joe. Now Jenny and Joe want to buy a house together.
Options for Jenny’s current property (we’ll call it Jenny’s House #1) are:
1. Future lending on Jenny’s House #1 to be done just in Jenny’s name and leaving the title as is. Potential issues here can be that the deal may not service or show borrowing capacity in this way depending on how the lender views the income across the pair.
2. Future lending on Jenny’s House #1 can be done leaving just Jenny on the title, but using Jenny and Joe on the loan. Importantly you’d be wise to check with your accountant as this would usually leave any debt tax deductible where there’s rental income just for Jenny. Joe would also want to seek some legal advice around the potential implications of being on the loan but not on title.
3. Future lending on Jenny’s House #1 can be done after the title is changed into Joe’s name too. That way both parties own the property. Again seek some accounting advice on this so that you have a good understanding of future tax implications here.