Home loan hell: Forced to sell mum’s flat to pay ex-wife
SIX years ago, Mark was talked into using his mum's home as equity to buy his first house. Now, in the midst of a messy divorce, he's going to have to sell his mum's flat to give half the proceeds to his ex-wife.
The Sydney father, who asked not to use his real name, said he felt "conned" by the Aussie Home Loans broker into the highly convoluted process, which all these years later looks set to leave his mum homeless.
It serves as a cautionary tale of how things can go wrong when parents put their own assets on the line to help their children get into the property market.
"I use the word 'conned' intentionally, because Aussie got two mortgages out of me, not just one," he said. "So now my number one problem, and priority, is what do I do with my mum?"
An Aussie Home Loans spokeswoman said the company had launched an immediate review and was "working with the broker to understand the details".
Mark said he couldn't afford to sell his mum's Bankstown apartment and move her elsewhere as prices had more than doubled in the area. "It now looks like my wife has left me and my mum will move in with me, and I'm 42 this year," he said.
He joked that any future romance may be hindered by the "fact that I now live with my mum". "I shouldn't laugh, as my life is being shattered in so many ways," he said.
Mark's story - which comes as the Banking Royal Commission prepares for its first round of public hearings focusing on consumer lending practices - starts back in 2011, when he and his partner decided to take the leap from renting to home ownership.
On their combined income, they figured they could afford repayments on a loan of $650,000, which in those days was enough to buy a three-bedroom house in Sydney. The problem for the couple was the deposit.
After being knocked back by ANZ, they met up with a broker from Aussie Home Loans - which at the time was 33 per cent owned by CommBank - who "fairly quickly" began asking about their parents' homes and whether one could possibly go guarantor.
"I was initially sceptical because I didn't really want to drag either of our parents into this," Mark said.
The broker recommended they use a gift of $50,000 from his partner's parents for a deposit to buy Mark's mum's apartment for $300,000. His mum would then gift the profit from the sale back to the couple, which they would then use for a deposit on a $650,000 home in Kogarah.
Mark said his mum, who would then "rent" the apartment back from him for a nominal amount, was okay with this arrangement because - ironically, as it turned out - she feared her violent ex-partner would try and claim defacto status and lay claim to her assets.
"[The broker] knew about this too," he said. "So my mum was actually happy with this arrangement. This was another point that pushed us towards saying okay, let's buy mum's place."
The upshot of all this was the couple wound up with two mortgages totalling $880,000. "Ever since then I have been shaking my head thinking, 'Why did we allow this to happen?' We should be in debt for a family home [for] $650,000, not in debt $880,000."
Mark said he just wanted "one house for me and my wife to build a family in", but now owned "two homes, owe a lot of money, and now I have to try and figure out what to do".
There was some good news, however. In 2014, the couple sold their Kogarah home to an apartment developer for $1.6 million, after a rezoning by St George council changed the maximum height from three to 12 storeys.
They used the money to buy a large home in Bundeena, on the edge of the Royal National Park, and pay off the Kogarah loan.
Mark said when the Aussie Home Loans broker heard about the couple's developer windfall, he began trying to "push me towards buying more homes so I could have a property portfolio".
"I was saying, 'No, mate, I don't want to a property portfolio. I just want to pay off my family home as fast as possible. I don't want to complicate things again ever again.' He was pestering me that much that I cut off all ties with him [and] refinanced the loans through CUA because they could offer me a better rate."
His ex-wife, who left him four months ago, is now asking him to sell the Bundeena home so she can take half.
"She's currently getting legal advice so it might well come to that, but I do not want to sell," he said, adding he might have to borrow "a few hundred thousand" dollars from the bank to pay her off instead.
"I will probably sell my mum's place, use that money to pay off any further debts and get my mum to move in with me. At least she can then retire ... and also help out with my son. So having mum around would help immensely."
Despite the bitter breakup, he added, he and his ex-wife agreed on one thing. "Bringing my mum's house into the equation was a very bad idea."
An Aussie Home Loans spokeswoman said the company had "no record of any complaint being made by the customer through our dispute resolution process over the last seven years".
"We always strive to achieve great outcomes for our customers and are concerned to hear that this customer believes his experience hasn't been up to the standard that we aim to deliver," she said.
"We have launched an immediate internal review and are working with the broker to understand the details. We have also tried to contact the customer and hope to work with him to address the issues and arrive at a resolution."
Housing market analyst Lindsay David from LF Economics said people needed to be aware of the risks when involving a parent's home in the purchase of a property.
"Marital issues, the loss of a job, more often than not it's at those times, the worst possible time, when people have to start to consider how to unlock themselves out of the financial risks they've acquired," he said.
"The majority of people just don't have the cash to come up with a 20 per cent deposit, so we use unrealised capital gains that exist within a house like it's a bank account. But you can't just take a tile out of the land bank and pay it back to the bank."