Relative is close but not immediate family like parent/sibling, been working overseas most of life and came back couple of years back to dive into property game. Relative requested joint name for loan application to boost loan approval possibility. This is due concern of not having local credit history, relative bought car and didn't managed to get loan so paid full in cash. Target property is a commercial property. Myself, I don't have a property loan or car loan.

There is an importance for loan approval since relative is interested in an auction property. Serving for loan and management of property will be done 100% by relative. Basically just want to make use of my local credit history.

Would like to know what are the risks and measures I can protect myself, there is little doubt that relative can serve loan - but life happens.

Legal implications:
1. Bank loan - since my name is in it, the bank can come after me and declare me bankrupt in the event of default correct?
2. I should request my name to be in the S&P as well? I'm aware there will be transfer fee to remove my name in the future. What other legal implications do I bear if my name is in S&P? Example, if property is rented out and tenants are caught doing illegal things
3. I read that co-owners of a property can have a Joint Ownership Agreement, but it doesn't solve (1) and (2) correct? It mostly covers who pays loan/maintenance as well as what to do with property in event of fall-out/disagreement/death?

Future home loan eligibility/DSR
1. Does it affect my DSR? If yes, is it my half the amount of monthly loan repayment?
2. Will my first home be considered "2nd property" by bank?

Tax:
1. Am I liable for RPGT if relative disposes property within 5 years?

Feel free to add more points for consideration, I'm not too familiar with the property world.

This post has been edited by roarus: Apr 25 2021, 10:29 AM

I stopped reading at "relative". Probably the biggest mistake you can make in your life.

this

There is no mention on how much he is paying you for the long write up of using your name ? .... Risks versus benefits.

This post has been edited by mini orchard: Apr 25 2021, 11:03 AM

My priority at the moment is finding out legal/tax implications due to default and property sale later, and what measures can be done for protection

This post has been edited by roarus: Apr 25 2021, 03:12 PM

Nothing.

In law, both purchasers and borowers are jointly liable, or severally liable, or jointly and severally liable in the event the property goes under the hammer.

If one is just a borrower only, then is just the repayment of the outstanding loan if the foreclosure amount falls short.

This post has been edited by mini orchard: Apr 25 2021, 03:39 PM

Thanks for the input, I guess in the event the other party unable to serve loan - whatever in JOA also no use since I sue the person also no money pay.

Bear in mind also that JOA so far macam not seriously legally tested yet.

It's also hard to enforce if the person decides to MIA or has no money to claim from.

Note also that if you enter as a joint borrower, you'll lose any potential "first property purchase" benefits like a high MOF for future property, and when calculating DSR they'll use the full instalment, not whatever % you're actually paying because legally you're liable for the full amount, so when bank calculate risk they'll take the full amount into account.

Want to clarify, for this "first joint" commercial property also affects it?

I thought only residential property will be taken into account

Ah sorry, I missed that.

If you get marked as having high liabilities/high DSR from the financing of this commercial property, banks might consider you a high risk customer anyway which may affect the MOF of future property purchase. Government schemes like Skim Rumah Pertamaku or affordable housing, and the max 90% financing of SPA price shouldn't be affected by your ownership of a commercial property.

But in reality, banks only calculate based on your debt and your loan 🤣 so if you have several hundred thousand of loan already in your CCRIS, bank will still mark you as high debt customer.

Note that you cannot get RGBT exemption as it's commercial property. The once-in-a-lifetime exemption on any chargeable gain from the disposal of a private residence, where the RPGT Act defines a private residence as defined in the gazette order to mean a house, a condominium unit, an apartment or a flat in Malaysia, and includes a serviced apartment and a small office home office. It must be owned by an individual, solely or jointly, and must be used only as a dwelling house.

This post has been edited by DragonReine: Apr 26 2021, 01:10 PM

If you take 1 mil loan to purchase the join property, how much more will you able to loan for a residential property base on your current total monthly income.

Even if you qualify for 100% residential loan, your 'income' may not cover the monthly repayment required by banks.

Bank is not interested who pays for the commercial loan even if you are not paying. As long you are the borrower, the monthly repayment will be 'deducted' from your current monthly salary figure to arrive at the 'nett income.

My suggestion

Assuming the loan amount is 2m

Ask relative to park 2m in cash under ur name in fd. In the event relative runs road then u get to use tat money to repay loan. The interest ll go to u regardless relative is DOA. At the end of loan repayment relative gets to hav the 2m principal back into pocket. If relative doesn't agree on tis then just ask relative to stfu.

On top of the above, if relative has the intention to utilise ur loan capability then u r entitled to a big angpao n the angpao should b big enuf to cover any potential loss of opportunities in Wat so ever aspect. Otw relative should stfu oso.

Sekian 😎

I give my dua puluh sen. U decide if you want to do it after accessing the risk.
Some conditions to fulfill if you decide to go ahead.

1) use a sdn bhd (% are easy to distinguish)

2) take part in the investment. Meaning u serve the loan on your share %. This is to make sure u know what u are investing rather than give your relative to use your name and blame everyone else except yourself when sh1t hits the fan. If u dont like the investment, then dont need to bother to consider.

3) put in 3-12 months of loan installment (reserve) into the company in case sh1t hits the fan. Every cost or expenses is deducted through company account. So clear cut on everything.

4) ask lawyer to draft execute shareholder agreement. Put whatever safety precaution u want into the agreement.
For example, if one shareholder dont fork up loan installment this month, it will be deduct from the reserve and the shareholder has to replenish back. Etc... non performance on paying etc. Many things need to consider.

5) with the above, u can take certain control and can opt to sell the property if sh1t hits the fan. Please consult lawyer on the details.

Anyway, alot of things need to input into this. It can be done to minimize the risk but not fool proof.

1) yes. U will usually be the guarantor to the company. So DSR is affect for next property.

2) rpgt will be paid by the company when dispose.

I want to have such good relative. Angel relative. Boss want to become my relative? Hahaha

Thanks for the detailed 20 sen, I like point #2.

I'll give this "opportunity" a pass since I deem the timeline too short to make a rational decision

I will not joint purchase with relative in my cases.

Joint buying with spouse is good enough. Sometimes relative relationship dont share the value, most probably went to some haywire issues in some cases.