Real Estate – Double Equity
Got real estate? If you do, you’ll want to read the third part of this three-part Real Estate Series.
Gone are the days where the primary carer would get the larger family home, and the other parent would live in a place a quarter of the size. With shared and equal care arrangements for children becoming the increasing norm, there is a need for each parent to have a suitably sized home.
The challenge separating couples face right now is affording a suitably sized property each on their incomes in a rising property market. A couple’s combined income increases their borrowing capacity. And so, to afford each person a suitably sized home, there is a trend towards separating couples remaining financially together for a period for borrowing purposes only—that is on paper.
And this is where the Double Equity option comes in.
What is it? Equity in real estate is essentially the home’s value minus the amount owing on the home loan. The Double Equity option involves using the available equity in the existing home owned to purchase a second property for the person moving out.
How does it work? There could be variations to this, but a couple might draw on some of the available equity in their existing property to pay a deposit for the second property, obtaining a mortgage for the second property’s purchase price or use the existing property as 100% security for the second property’s debt.
The idea is that, at a specified time or upon a specific event occurring, each person refinances the loan for the property that they’re to keep into their name, with ownership of the property transferred simultaneously. But, of course, adjustments made need to be made then for “fairness” reasons.
Pending this whole transfer and refinance, arrangements for loan repayments and outgoings for both properties are in place.
The concept seems simple, but you need to be sure that your agreement paperwork appropriately covers off all reasonably foreseeable what-if scenarios. The reality is that there are inherent risks in maintaining joint financial ties.
Your agreement paperwork needs to be operational and relevant at the refinance due date so that you don’t end up in a situation where there are no, or insufficient protections or a dispute arises with no default mechanism to resolve it.
If you and your partner are essentially in agreement about who will keep what but have a few remaining questions about what’s possible to achieve the very best outcome for you both, then book in for Lift Off!
Get clear, achieve clarity, and feel confident and in control of the steps to make your separation and any official agreements.
Join our collaboratively trained, multi-award-winning family lawyer, Siobhan Mullins, for an online or face to face 60-minute session, where we dive into your agreement and share insights and ideas to maximise financial and emotional outcomes for you and your family.
Suited for individuals and couples who are 85-100% clear on their agreement, you can participate with your partner for a fast way to share information, understand the process and make decisions together.
Lift Off is an obligation free session and is where we talk price, process and steps if we’re to work together as part of our Done For You Hand Hold service.
We have a maximum number of spots available each month, so get in now and book ahead. To book, CLICK HERE
*Please note that the information herein is general in its nature. It isn’t legal advice. You should make your own enquiries as to the advantages and disadvantages to you of the Double Equity option if you pursued it.