Property co-ownership: Accessing the property market
As it seems that home ownership moves beyond many peoples’ reach, the option of property co-ownership is seeing many Australians achieve their own Great Australian Dream.
Property co-ownership refers to a single property owned by two or more parties. Geared towards people unable to purchase a property independently, it involves pooling resources with others in the same boat, and getting a foot on the property ladder.
Property co-ownership has proven popular among:
- first home buyers;
- single parents;
- single-person households;
- households comprising multiple generations; and
- those looking for a sense of community.
Don’t start scrolling through your contacts list just yet. Consider these precautions first:
Property ownership in Australia is categorised two ways:
- Tenants in common
Two or more people own a share of a property. They may own different percentages of the property and may bequeath their share to anyone upon their death.
- Joint tenants
Two or more people own a property jointly and upon one person’s death the property ownership passes to the surviving owners.
A joint tenancy is the most common arrangement for couples, however is probably not the most appropriate arrangement if you’re embarking on a property co-ownership arrangement.
You’ll need to be clear about these structures when seeking finance and purchasing your property.
Property co-ownership agreement
You and your bestie may be 100% committed to a property co-ownership arrangement, but circumstances change. If down the track one of you wants to sell and the other doesn’t, what then?
It’s only possible to partition ownership if the property can be divided – painting a line through each room doesn’t count.
Who is responsible if the property requires unplanned and/or expensive repairs? What happens in the event of unemployment, bankruptcy or death?
There are examples of co-owners settling disputes like these through litigation; a stressful and costly exercise easily avoided by a Co-ownership Agreement.
It’s vital to speak to a solicitor or property conveyancer for advice and guidance prior to making any co-ownership decisions.
Financials and other practicalities
Obviously you’ll discuss the amount you’ll each contribute to the deposit, mortgage, insurance, rates etc., but what about utilities and wi-fi? Will you have a joint bank account, a maintenance fund? Will you share food and living spaces?
Dual-occupancy properties resolve many of these issues, however it’s vital that all co-owners have a very clear understanding of their obligations, and their expectations of each other.
Again, a Property co-ownership Agreement will cover these issues – and others – so that all parties are fully aware of the commitment they’re making.
So far we’ve discussed the legals and financials, let’s now consider the benefits.
Property co-ownership can:
- provide access to the property market;
- break the rent cycle (owner occupiers);
- start a property portfolio (investors);
- purchase a better home than you could afford alone;
- purchase a fixer-upper and improve its value by pooling resources and skills; and
- provide a community (think single parents sharing child-minding, etc.).
Property co-ownership may be the solution you’re looking for; you may even find you qualify for a government first-home-buyer package!
However, there’s an old saying about the risk of mixing money and friendship. As with all financial decisions, risk can be minimised through professional advice and well-informed decision-making. Your solicitor and/or a property conveyancer will be best placed to answer all your questions.
Free Loan Review
Receive a customised review to improve your savings and reduce the amount you are paying.
Related Blog Articles
This article discusses the importance of understanding your home loan interest rates and how interest rate changes affect your mortgage. It includes a formula to calculate your home loan repayments and concludes with a recommendation to seek the assistance of a mortgage broker. – How interest rate changes affect your mortgage.
This article explains what the difference is between offset accounts and redraw facilities, concluding the use of offset accounts to be the better of the two. – Offset account vs redraw facility.
This article addresses potential financial stress caused by the expiry of the interest-only period of IO loans. It uses a case study to explain how these loans work when managed well and then provides some options for borrowers who might not be able to meet increased repayments when the IO period ends. – Managing the transition of your interest-only loan.
In this article, we look at the role of mortgage brokers and the key benefits of using one. We also set out a list of questions and documents for clients to prepare themselves for a meeting with their mortgage broker. – The benefits of using a mortgage broker.
This article provides an understanding of mortgage repayments and how different factors affect total interest paid. It uses a case study to demonstrate. – How to own your home earlier.
This article discusses advantages and disadvantages of renovating a home compared to upgrading to a new one. – To renovate or to upgrade – which is best?
The importance of your credit score is often forgotten until you find yourself applying for a loan. This article explains how to find your credit score and details five things you can do to improve it. – Correcting your credit score.
This article looks at the hidden costs involved in the purchase of a new home and how to plan your savings around them. – Hidden costs of buying a new home.