Longing for a home of your own? Buying with a friend, family member or colleague can make that happen sooner.
Our last blog post looked at family equity loans as one way of buying with friends or family. Today we introduce a second way which is buying as ‘joint tenants' or ‘tenants in common'.
So what's the difference between joint tenants and tenants in common?
- Joint tenants hold the entire property jointly with another or others. This type of holding is commonly used by married couples, not friends. In a joint tenancy, if one person dies, that person's interest transmits to the survivor, even if the joint tenant who died had no will.
- Tenants in common own separate interests in the same property. Each person does not have exclusive possession of any part of the property and you can bequeath the property in your will to whoever you like.
Benefits of buying together
Buying together also helps by splitting all the other costs involved, like legal fees, stamp duty and the like. It also means you could trade up to a bigger or better located property. You also have someone to help with the cleaning, and any renovation projects like painting or even sanding the floorboards. And you'll be paying off your own mortgage, not someone else's, which is what happens if you stay renting forever.
First Home Owners Grant
Keep in mind however, there are implications regarding access to the First Home Owners Grant (FHOG). If both of you are eligible for the FHOG you can apply, however only one grant will be paid. If one of you is ineligible then the other will automatically be ineligible for the grant.
“Marry in haste, repent at leisure” they say, though, and it's just the same with co-ownership. You must, must, must have a co-ownership agreement drawn up, which sets out the roles and responsibilities of each of the buyers. It also deals with all the important issues upfront, like what happens if one investor wants to sell out, or if they stop making their mortgage repayments.
These co-ownership agreements can be expensive – depending on the solicitor, a few thousand dollars even. However, Mortgage Choice has partnered with Pod Property, who are experts in this field and can provide you with a co-ownership agreement for around $350. They can also help you organise your conveyancing and answer questions on joint financing.
Buying with someone else gives you an instant housemate, and really put you ahead in the property game. And when the time comes to move on, one owner can buy the other out, you can sell together or, all being well, you may decide to keep the property as a joint investment using the equity you've built up as a deposit for your next home.
Your Mortgage Choice broker can help by discussing your home loan options and your obligations as a joint borrower.