I do a lot of deals for family members who own property together. Siblings, parents and adult children, cousins. It is far more common than the banks’ marketing would have you believe, and it throws up problems a standard two-borrower application never does. This one had both siblings on the title and one of them living on the other side of the world.
Client Situation
A brother and sister jointly owned an investment property on the far north coast of New South Wales. The brother lives in the Illawarra and works in public education as an assistant principal. Married, three children. The sister lives in south London, where she runs her own nutritional therapy practice through a UK company and draws a modest wage from it on top of the profit. Also married, also three children.
They had finished refurbishing the property not long before they came to me, and the rental appraisal came back between $870 and $910 a week. What they wanted was straightforward on paper: refinance the existing investment loan, fold in a separate $100,000 facility they had used to fund the renovation, and end up with one variable loan with a redraw they could actually get at.
The Challenge
Straightforward on paper. Not straightforward in a credit assessment.
Two borrowers sitting in two tax jurisdictions on the one application. One of them a non-resident with self-employed income in pounds and a wage from her own company that had only started running in October. Two existing facilities at two different rates with two different repayment dates. And the part that sinks most of these files: both siblings are married, and both households carry their own owner-occupied mortgage and their own living expenses.
Assessed the lazy way, each sibling looks like they are personally carrying an entire household, plus a full owner-occupied mortgage, plus half an investment loan. Do that and the file does not service. It is not close.
The reality was different. The brother’s wife works in the health sector and covers her share of their household costs along with half their owner-occupied loan. The sister’s husband earns a high income offshore and covers their UK mortgage in full. Both true. Neither of them self-evident to a credit assessor reading a file in another city.
What We Did
Lender selection came first and it was effectively the whole deal. I needed a lender that would take self-employed foreign income and Australian PAYG in the same application, accept a UK company’s accounts with a depreciation add-back, and lend to a non-resident without turning the LVR into a separate problem. That narrows the field quickly.
From there it was documentation. I applied the common debt reducer so each borrower was assessed on their share of household expenses rather than the full amount. It is a small policy lever and it changes the arithmetic completely on family co-borrower files. Then I evidenced the spousal arrangements properly — payslips for both spouses, a statutory declaration, and bank statements showing the pay credits landing and the mortgage payment leaving the spouse’s account month after month. On that evidence the UK owner-occupied mortgage came out of the assessment as a liability for the sister entirely.
The renovation facility folded into the new investment loan, so two debts became one. Variable rate, principal and interest, redraw available. They did not want the surplus locked away in a fixed product.
The Numbers
| Item | Position |
| Security valuation | $1,490,000 |
| New loan amount | $278,000 |
| LVR | 18.66% |
| Rate and repayment type | 6.64% variable, principal and interest |
| Fees | $15 per month, no annual fee |
| Weekly rent used in servicing | $870 |
| Facilities replaced | $167,378 at 6.49% and $100,000 at 5.39% |
| Net surplus income | $3,084 per month |
| Surplus funds at settlement | $10,272 |
One thing worth being upfront about: the rate went up, not down. The two facilities being replaced sat at 6.49% and 5.39%. The new loan came in at 6.64% variable. That is what specialist pricing looks like when one of your two borrowers is a non-resident running her own business overseas. Mainstream pricing was not on the table for this file, and anyone telling you otherwise is quoting a rate they cannot deliver.
What did improve was the monthly commitment and the structure. On a full 30-year principal and interest term, $278,000 at 6.64% works out at roughly $1,780 a month against the $2,561 they were paying across the two facilities it replaced. That figure assumes a fresh 30-year term, which is the caveat worth stating plainly: resetting the clock lowers the monthly number and lifts the total interest if you only ever pay the minimum. They have redraw and an LVR under 20%, so they have every option to pay it down faster. Whether they do is up to them.
Practical Takeaway
Low LVR does not approve a loan. This file settled at 18.66% and it still needed the right lender and a properly evidenced spousal expense position to get through. Equity is not servicing. People treat the two as interchangeable constantly and they are not.
If you own something with a sibling and one of you has moved overseas, do not leave the debt structured the way it was when you both lived here. It does not get easier with time. Tax residency changes, employment contracts change, and lender appetite for non-resident borrowers moves around more than almost any other part of the market.
And if your spouse covers a mortgage or a share of the household, that is worth something in an assessment — but only if it is documented. Telling an assessor over the phone gets you nowhere. Statements, payslips and a statutory declaration get you a decision.
How We Approach These Deals
I start with the constraint, not the product. On this file the constraint was a non-resident self-employed co-borrower, so lender policy determined everything and the rate conversation came last. Then I build the file so the assessor never has to guess. If a liability is being covered by somebody else, the evidence sits in the submission, explained, before anyone thinks to ask for it.
Family co-ownership arrangements are also worth reviewing every few years. The structure that suited you when you bought is rarely the structure that suits you after a renovation, a move overseas, or a change in either household’s income.
Talk It Through
If you own a property with a sibling or a parent, or one of you has moved overseas and the loan has not been looked at since, it is worth a conversation before the next rate review rather than after it.
This article is general information only and does not take account of your objectives, financial situation or needs. Figures are illustrative of the transaction described and are not an offer of credit. Names, lenders and property addresses have been withheld.
Jeremy Harper, Credit Representative CRN 463430 of Mortgage Specialists Pty Ltd ACL 387025