Jul 18

Finance: Buying a house together

FOR borrowers looking to take advantage of the low interest rate environment and the wide range of competitive home loan deals on offer, buying property in co-ownership may be a good way to get a foot in the door.

The latest Mortgage Choice Future First Home Buyer survey found 67 per cent of Australians plan to buy with a partner, spouse, family member or friend – which is significantly higher than the 30 per cent who said they would purchase a property on their own.

Co-owners can split the cost of the property and all the associated expenses, so that repayments are noticeably less than what a borrower would pay if they were buying solo.

For those borrowers thinking about purchasing their first property in co-ownership with someone else, like a sibling for instance, there are a few things to consider:

■ Know what both parties want: When considering purchasing a property with someone else, it is important to know whether or not both parties plan to live in the property, or earn income from renting it out partially or wholly. Concessions and grants along with tax breaks and other possible outcomes of an investment need to be taken into account.

■ Financing the purchase: Financing a co-ownership agreement is not all that different to traditional borrowing. Lenders will still look at the income, expenses, assets and liabilities of each borrower and expect regular lending criteria to be met such as good savings habits, steady employment history, and a clean credit record. If the buyers are not a “couple”, some lenders may assess their loan approval based on higher, individual living costs.

■ Avoid common pitfalls and seek advice: Difficulties can sometimes arise between buyers who are living together, which is why, as with any major financial transaction, it is important to seek legal and financial advice before signing a co-ownership agreement.

■ Co-ownership agreement: An agreement should be drawn up as a cornerstone legal document for the investment. This will set out the roles and responsibilities of each co-owner and deal with all the important issues upfront, like what happens if one party wants to sell.

■ Insurance is essential: Nobody ever expects bad things to happen, especially when they are starting their home buying journey. That said, accidents do happen, so it is important for borrowers to have both their life and home properly insured.

Richard Windeyer is a mortgage broker with Mortgage Choice. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Phone Richard Windeyer on 1800 01 LOAN.

Richard Windeyer, Mortgage Choice

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