Buying your first home in Perth is no easy task, especially if you’re thinking of doing it on your own, so it’s no wonder that now more than ever before, first home buyers are looking at alternative ways to get into the property market. Buying property with a friend has its advantages, like two incomes and double the savings, but it’s also important to weigh up the risks involved and consider your options.
What should I consider?
- Choose your property partner carefully – look for people you can trust and who share your views.
- Have a plan – what is the goal for the property? Are you looking to rent it out or be owner occupiers. Always have an exit strategy for when you want to get out.
- Consider the risks – there are a number of things that could go wrong and you need to be prepared and deal with these sensibly.
If my friend decides not to pay the mortgage, will this affect me?
Yes, if you’re co-signed onto a single loan together and together you are not meeting the minimum repayments for the loan, your credit score will be greatly affected. It doesn’t matter if you’re meeting your agreed requirements, if you’re both not meeting the minimum requirement then the lender won’t be happy.
Do we have to split 50/50?
No, you may choose to own 75% of the home with your friend owning 25%, but be mindful that regardless of how much or how little you own, you are still liable to ensure the full repayment is being made. It’s also important to note that if you do own more or less than 50%, it’s important to have a legal contract noting this.
Property Share home loan option
Property Share is a home loan option which allows friends to purchase a property together but keep their finances separate. This means you each have separate loans in your own name and can use these loans to purchase a property with the combined value.
This option allows you to keep an eye on your own loan and pay as much towards that line as you can afford, putting you in a better situation financially.
For example, Matt and Josh have been friends for years and both want to get into the property market, but each only have $20,000 saved for their deposit. They decide to buy a house together, but want to keep their finances separate. They each take out a home loan of $250,000, giving them $500,000 to purchase the property. The lender requires Matt and Josh to guarantee each others loans for security support, but they both have the flexibility to structure their loans as they please.
It is required by the lender that each seek independent legal advice before proceeding.
If you’re interested in finding out more about buying property with a friend or want to know more about Property Share home loans, get in touch with our experienced brokers today to ensure you’re on the right path to home ownership.