Buying a home jointly with a partner, friend or family member

Quite simply, property co-ownership is when two or more people get together to buy a home jointly. They pool their money to pay the deposit and combine their borrowing power to increase their mortgage eligibility. Co-owners are also equally responsible for paying off the mortgage depending on the agreed-upon terms when signing. 

Property co-ownership allows you to own a home sooner than you would if you had to save the deposit yourself. It may also allow you to purchase a larger property or one in a more attractive area. This means that the rental income is likely to be higher if the property is used as an investment. If one or all of the co-owners choose to live in the property, this would need to be agreed upon before purchase and could save rental costs for all.

You can share the home’s expenses like maintenance, renovations and repairs. You’ll also be able to split all the property buying expenses like deposit, legal fees, stamp duty, and building reports. This splitting of the financial burdens leads to the biggest benefit of property co-ownership - you become a homeowner quicker. By splitting the costs, you don’t have to wait for years to accumulate the deposit or other upfront costs. You’ll likely also increase the borrowing power by combining all co-owners’ incomes and financial histories. And because multiple people share the burden of repaying the mortgage, you may be able to repay the loan faster.

Property co-ownership has two structures:

• Joint tenants - where the co-owners have an equal share in the property. If one co-owner dies, the surviving tenant/s or owner/s gets the rights to the entire property.
  
  
• Tenants in common - where ownership is unequally distributed. Every owner can pass on their share of the property via a will to a beneficiary. This structure provides more flexibility and may be more appropriate if you take out a joint mortgage with an unequal deposit. However, it’s recommended to have a legal agreement that clearly sets out every co-owner’s rights and obligations.

A binding co-ownership agreement can help avoid future litigation if co-owners have any disputes. For instance, if you purchase the property as tenants in common and have taken out a mortgage, you’re all jointly responsible for the repayments. If one co-borrower defaults on their part of the mortgage, other owners have to make up the payment or take a negative hit on their credit score.

A co-ownership agreement will help with situations like this. It sets out the rights and obligations of every co-owner. It should lay out who is entitled to continue living in the home if there are any issues, who is responsible for the mortgage repayment and maintenance, and how to handle bankruptcy or death.

If you have a joint mortgage but unequal shares, the co-ownership agreement should set out what happens if the division of the property changes in the future. You can also include different scenarios and timings, like what will happen if you choose to dissolve the partnership after one year or five years, etc.

Without a co-ownership agreement, you’d be forced to pursue litigation to ensure you don’t lose your financial interest in the property when issues arise. Litigation costs can be very expensive if one owner sells their rights or defaults on the mortgage repayments. Getting legal advice to create a binding agreement before finalising the purchase helps provide clarity and may help prevent disputes.