Should You Buy Property With Friends?
Co-buying property with family or friends in Australia can boost purchasing power and address affordability challenges for first-time buyers. However, it can lead to legal issues and strained relationships. Follow these 3 tips to avoid pitfalls and make co-buying successful.
Tip 1: Choose your co-buyer carefully
When co-buying with family or friends, ensure the relationship is mutually beneficial and aligned in goals. One of your first decisions will be how to structure the mortgage.
Ideally, each co-buyer would have a mortgage for their share, but most lenders offer joint loans, making all co-buyers liable for the full amount. If one can’t pay, the other must cover all repayments.
Lenders require proof that each co-buyer can repay the full loan, which may be tough if one has a low income. Avoid being stuck with full repayments by choosing a trusted co-buyer or speak to a broker about a property
share loan, that put simply is a loan for your portion and the co-buyer has a loan for their portion (must be with the same lender).
Tip 2: Decide how the property will be owned
Co-buyers must actively decide on financing and choose between two legal ownership types, which will determine how issues are resolved.
- Joint tenancy: Co-buyers share full ownership. If one dies, the other gains the entire title. Shares can’t be sold or bequeathed individually; all must agree to sell.
- Tenants in common: Each co-buyer owns a separate share, which can be sold or bequeathed. Distribution after death follows the owner’s Will.
Get legal advice on ownership structure and include terms for buyouts or control over share sales.
Tip 3: Protect your own interests
The key to co-buying is a formal co-ownership agreement outlining future property arrangements.
A co-ownership agreement should address:
- Determine how you will share property-related bills and who will be responsible for paying them.
- Specify how each owner is entitled to access the property if one or more owners do not live there.
- Who will maintain the property?
- How will you resolve disagreements relating to the property?
- What happens if one owner wants to sell up or exit the arrangement?
Seek legal advice to protect your interests in a co-ownership agreement in case the relationship breaks down.
Protecting your interests
To find out how you can help your children buy a first home, or for more advice on teaming up with family to co-buy property in Australia, contact a Lending Connections broker today.
The brokers at Lending Connections is familiar with co-buying arrangements and can provide financial advice and guidance on lending solutions if you are considering co-buying property in Australia.
For financial advice that is tailored to your circumstances and situation, or if you have questions about co-buying, get in touch with a Lending Connections broker.