How to buy a home with a friend.
We are the experts in co-ownership agreements for people who buy property together as tenants in common. Tenancy in common is where two or more people buy the same home.
Now, you might be thinking, ‘That’s too risky for me’. There are risks and indeed property co-ownership is different from your regular joint ownership mortgage.
Joint tenants v Tenants in common
Joint tenants example: Jessica and Stephen want to buy their first property as a married couple. A bank will give them one mortgage account and one mortgage – one lump sum between them. Joint ownership and if one dies, the other inherits the share.
Tenants in common example: John and Gary are single friends and they each have stable jobs and steady incomes. They’re sick of renting so they don’t see the point in paying for a postcode anymore. They each want to own a home, but it’s just not possible on one income.
But hey – they already live together. pay rent and utilities together. Why not buy a home together? This is where the concept of Property Share comes in – specifically a Property Share Loan and Co-Ownership Agreement.
Tell me about a Property Share Loan (CBA)
If our house-sharing duo want to buy a home together, a Property Share Loan can make their home-owning dreams happen. Whereas joint home ownership means you have one mortgage with one share of the property, Property Share Loans allow you to have multiple, uneven shares and loans in a property. This is called property co-ownership.
Why you should get a Property Share Loan with your friends or family members
Get a leg up by purchasing a more expensive property than you could otherwise afford on your own. You and your friends can start investing in property sooner, and each earn an income from rent charged to tenants if you don’t want to occupy the property.
Own property together whilst keeping your finances separate. (It’s worth noting however, that you will need to guarantee each other so you are still responsible if your friend defaults on the finance.)
Warning: You need a property co-ownership agreement
There are a few sticky situations that could pop up if you don’t thoroughly educate yourself about Property Share Loans.
What if John loses his job and can’t afford his repayments anymore? If John defaults on his mortgage repayments, and Gary can’t cover for him until he’s back on his feet again, everyone’s credit ratings will be destroyed.
Or what if Gary wants out, and wants to use his share of the property as an investment?
Or, what if John and Gary just stop getting along? What happens then? You can’t divorce your mates, but if you get a co-ownership agreement organised beforehand, you’ll have a legal, binding document that sets out everyone’s obligations. You’ll have something to refer back to should disputes occur.
Co-owning your first home has many advantages. Not only will you be able to keep splitting the cost of utilities, but you’ll also be able to split the cost of maintenance between multiple incomes. The cost of owning a home becomes significantly cheaper, and much more accessible.
Property Share Loans make it possible for young Australians to enter the housing market at a fraction of the usual cost than if they were buying on their own. But like any mortgage, all your options should be considered before committing.