March 3, 2014
If you don’t have enough funds to buy outright in your own name, and have yet to meet Mr (or Ms) Right, you may want to consider buying property with a friend. It’s not for the faint–hearted, but it’s increasingly proving to be a powerful way for women to enter the property market and get a kick-start for building wealth.
Buying with a friend is usually done as a tenants-in-common purchase, allowing two or more people to own interest in a property, either in equal or unequal shares.
Some of the advantages of purchasing as tenants-in-common include sharing the costs of the initial purchase and ongoing costs including loan repayments, maintenance and upkeep costs, property management fees. Another benefit is the ability to sell your share or leave your share to whoever you choose.
Lenders may allow you to mortgage each share of the property independently, ensuring other co-owners have no obligation to pay a mortgage that is only over another owner’s share of the property. However, some lenders don’t allow these types of mortgages and will issue one mortgage over the property, meaning each party is responsible as co-borrowers.
As a co-borrower, you’ll be legally responsible for the whole debt if the other person doesn’t make repayments on the loan, not just your share. If neither of you can pay the debt, you’ll probably end up with a default listing on your credit report. That can make it tough to borrow money in the future.
Entering into a financial agreement, regardless of how good the relationship, can be difficult to manage. It is best to do some thorough legal investigation before you commit to buying property with a friend. One approach is to develop a Co-Ownership Agreement with a solicitor. These agreements can set out the terms of on-selling shares in the property, proportion of ownership and liability for costs such as the mortgage, maintenance and upkeep. You should also consult a solicitor independently to ensure your legal rights are protected.
It sounds more complex than traditional property purchases, and it is, but buying property with friends has proven really effective for many women. And don’t forget, if you’re a first home buyer, you may still be eligible for the First Home Owners Grant (FHOG), but you’ll need to check your eligibility. Generally, all people purchasing the property will need to be eligible for the FHOG, however only one amount of $7000 will be issued per property. Worth investigating!