If you’re thinking about buying a first home, you might have considered whether you could make the purchase with a friend or relative.

It’s becoming increasingly common for buyers to purchase a property with someone who is not their partner.

Adding another person to the purchase, either instead of or as well as a spouse, can make it easier to get into your first property.

However, if you’re thinking about heading down this path, there are a few things to know about “co-buying.”

What are the benefits?

There can be power in numbers when it comes to buying a house.

When you have another person buying with you, you can include their income in your application, and their savings as part of the deposit.

That might mean you are able to put a larger amount down on the property you want to buy, or the additional income in your calculations might allow you to borrow more, to get you into a more expensive property.

Sometimes, it might just mean you have additional income to help you pay down the mortgage more quickly or make the purchase more manageable.

How does it work?

Your home loan with co-borrowers will usually be a joint loan, with all borrowers named on the agreement. This means you are all individually and collectively liable for the loan.

Once the loan is in place, you may be able to arrange payments so each borrower pays a specific portion from their own bank accounts. However, some lenders may prefer payments to come from a single account to avoid complications, so it’s important to check with your lender on this.

When it comes to the ownership structure of the property itself, there are generally two options for two or more borrowers; joint tenants or tenants in common (a form of joint ownership). This distinction affects how the property is distributed after death, with tenants in common each owning a specific share of the property that can be passed on to their beneficiaries. If you’re not spouses or partners, it may be appropriate for co-borrowers to own the home as tenants in common.

Joint tenants, on the other hand, own the property together, and in the event of one owner’s death, the surviving owner(s) automatically inherit their share of the property. While this is a common ownership structure for spouses and partners, the right option depends on your specific situation. For some couples it may be tenants in common. It’s important to seek legal advice to determine the ownership structure that is most appropriate for your situation.

Financially intertwined

Although you might be living quite separate lives, when you’re co-buyers of a property, you are financially linked for the time that you own it, and that’s something that is important to get to terms with early on.

If any of your co-borrowers fell behind on mortgage payments, for example, you’d all be liable for those, not just the person who’s stopped paying.

You’ll need to feel satisfied from the outset that you’re comfortable that you can all afford to service the loan and have plans in place should your circumstances change.

Other considerations

It’s usually a good idea to have a property sharing agreement in place to lay out your rights and your obligations with regards to the property. Your lawyer can help with this.

You might also need to think about things like what happens if one person puts more time and resources into the maintenance or improvement of the property than another, or what you do about uneven deposits, if one person put more money in at the start.

It’s also important to consider what would happen if one person wanted to sell the home and the others did not.

These are all issues that should be worked through with a lawyer, and agreed between all co-borrowers, before you take out the home loan, so you’re not caught out down the track.

We can help

Whatever your co-buying plans, our expert team of SHARE and Newpark Home Loans mortgage advisers is here to help. We can work with you to determine what your options might be and how you and your co-buyers can achieve your goals. We can assist you through the application process and beyond.

Home ownership might be closer – and home loan approval easier – than you think.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.