Almost one in five Australians say they would consider buying a house with a friend or family member (according to CoreLogic)!
While many of us baulk at the idea of being legally bound to someone other than our spouse, others see this type of an investment as a quicker and easier way to break into the property market.
Before you sign on the dotted line with your best mate, consider the pros and cons of such an arrangement:
Cons of Co-Ownership
Joint liability: When you secure the mortgage you aren’t just signing up for your half, you are legally responsible for the entire debt. Consider how you could afford to keep up with repayments in the event of a falling out, death of a co-owner or another life-changing event.
Your borrowing ability can be maxed out: Because you’re liable for the whole loan, you might not qualify for a car loan, a personal loan, a credit card or even a phone plan after you get your mortgage.
Defaulting is real, even if it’s not your fault: If your friend doesn’t keep up their end of the bargain and you can’t cover the difference, you may default on the loan. This can damage your credit rating and make it harder to get another loan in the future.
Pros of Co-Ownership
You spend less time saving for a deposit: By splitting the cost of a deposit, you’ll be able to purchase property sooner and start making capital gains.
You unlock better borrowing power: Are you young, single and ready to enter the market? With a friend’s income on the paperwork, you’ll get the DINK advantage: You can borrow more money, which means you can buy in more established areas where the growth potential is likely to be better.
There is legal protection available: It will cost you a little bit of money to have a document outlining the terms of your partnership drawn up, but it’s worth it. Not only will having everything out on the table from the get-go help prevent future meltdowns, but it can make any dispute a lot less costly.
Do you have questions about buying or selling property in Queensland? Our conveyancing solicitors can help you with everything from negotiating partnerships to drawing up sales contracts and everything in between. To get in touch, just dial 07 3236 2852, email firstname.lastname@example.org or fill in our simple online contact form.