Have you been struggling to get onto the property ladder? Co-ownership gives people who can’t quite afford to make their first step onto the property ladder the chance to do so, though it does come with risks. However, so long as you have someone you truly trust, this could be the solution for friends, partners or even family members to purchase a really solid property that is beneficial to all parties involved.
Tenancy in common
First of all, there is tenancy in common. This is a very structured agreement between the people involved, where each person purchases a certain share of the property. For example, if you wanted to buy a $500,000 property with your mate Greg, you could both put in $250,000 each and you would both own half. However, if Greg had better credit and could attain more capital from financing or a better home loan interest rate, it might be better for him to put the majority of the money in, like $400,000. But then he would own 80 per cent of the property.
Because individually you own a discrete amount of the property, you can pass it on or sell it as you like. But the other person can do the same. It’s a lot more open-ended, and might be sensible for friends looking to group together to purchase a particular piece of real estate.
Joint tenancy
On the other hand, there is also a joint tenancy, where there aren’t specific shares and everyone owns the property equally. There is one major issue for non-married people wanting to do this: the law of survivorship. This legislation applies to joint tenancies, but not tenancies in common. Essentially, this means that if a tenant dies while operating under a joint tenancy, the property defaults in ownership to the other tenant.
You also can’t sell your share in the property, because all of it is in both of your names, unless you sever it to a tenancy in common. It can get very complicated, particularly if you have more than two people in the agreement.
Co-ownership can be a fantastic way to take your first step onto the property ladder, but be prepared for any possible problems. Mortgage defaults, cold feet and buyer’s remorse are all things to discuss and get in writing before purchasing with friends. And remember – you can apply for credit as a group in order to qualify for a higher loan, so make sure you get into contact with us to find out what deals you can get collectively!