If you’re struggling to save a sizeable deposit or you want to buy a house that’s out of your price range, an option might be to purchase a property with a friend or relative.
Buying a place with someone else has a number of benefits. It means you might be able to get into the property market sooner than if you were buying a property by yourself.
It allows you to combine two incomes to maximise the value of the loan to buy a better property. It also reduces the size of the deposit you will need to save and also means you don’t have to service the total loan amount yourself.
Sharing the load
A ‘Property Share Loan’ allows two parties to take out separate loans for the same property, to suit their individual needs.
If you’re thinking of buying a property with a friend or relative, the first thing you will need to do is decide where you want to buy the property and how much you’re willing to spend.
Once a property has been found you will need to decide the ownership split, each party’s share of the repayment and the period of time you intend to hold the property.
Other considerations include how to split the costs associated with the property such as stamp duty, taxes and bills plus how any renovations would be paid.
Have an exit strategy
Have an agreement that covers what would happen if one individual’s circumstances change eg: one person loses their job.
Ensure there is a formal agreement that states what happens if one side wants to sell their share and who pays the selling costs. Maintenance costs also need to be covered along with what happens if the property is rented out and how the loan will be met if a tenant can’t be found for the property.
Security guarantee
With the Property Share Loan, each side provides a security guarantee for the other side, so if one party defaults it’s the responsibility of the other party to repay the loan.
Under the facility, each side has a separate loan that suits their circumstances, for instance one party can have a variable interest rate, and the other side can have a fixed interest rate. Each side can also determine whether they make repayments weekly, fortnightly or monthly.
What you need to do to get a Property Share Loan?
- Everyone must be an owner of the property (no third party guarantors)
- Each of you will need to show that you can repay your own loan facility
- You must guarantee each other’s’ loans (security support only)
- You must seek legal advice and all sign a Property Share Statutory Declaration Form before entering into a Property Share agreement
If you would like to know more about Property Share, call or email us today.