As house prices remain high in most major Australian cities, sharing a mortgage with friends has become a viable means to enter the property market. Could it be the right move for you?
In recent years, the concept of buying property with friends has gained more popularity. And not just among young Australians looking to get a foot into the market – also with buyers looking to purchase an investment property.
But before you sign on the dotted line, here are some of the important things you should bethinking about if you’re considering chipping in with mates.
The benefits: split expenses and shared responsibilities.
For people looking for their slice of the ‘great Australian dream’, sharing a mortgage could provide a good way into the property market. For younger generations, today’s market can be particularly challenging to get into, especially when compared to the opportunities of post-war baby boomers, when being in your 20s with an average income appeared to be enough to get on the ladder.
By sharing a mortgage with your closest companions, the ‘elusive’ world of property can often be more attainable. In the hunt for the right property, two heads can often be better than one and the potential of purchasing a lemon could be minimised. A problem shared can also be a problem halved.The shared responsibilities of property ownership – including expenses from sourcing finance, deposits and taxes, to mortgage repayments, utility bills, repairs and extras – could make the commitment less of a financial burden.
What to consider
If you’re lucky enough to have good friends to invest with, make sure you have a very direct conversation about how to make it as successful as possible.
Take the time to understand each others’ spending habits, so you’re able to manage monthly payments and bills without a hitch. Set the boundaries and agree on what works for all involved. And find the best way to hold each other accountable in a way that sustains your financial commitment.
Ask yourself, how will it work if you both live in the property together? While you may enjoy a regular routine of early starts and early nights, your friend may want to have friends over or enjoy late nights. Just like any mutual relationship, it helps to be clear not just about the type of property you’d like, but how you’d like to live.
How to share successfully
Transparency is the best place to start. Before signing the mortgage, agree to lay your finances out on the table. Honesty from the get-go is the best policy. It helps to clear any confusion that may arise down the track.
It’s important to ensure your contract works for all parties involved. This means stipulating what conditions a property can be sold under and when it can be sold. As well as having a clear understanding of what should occur if either party cannot make payments. This helps to diminish any potential concerns around ownership status.
If you and your friends are living together in the property, also draw up some guidelines together so you understand each others’ needs and deal-breakers. This helps create fair expectations for the road ahead.
Giving it a shot
Once all parties understand each other’s circumstances, needs and lifestyle habits – you’re ready to become homeowners.
Pooling money together for a new home can bean exciting adventure which has the potential to offer short-term and long-term rewards, both personal and financial.
Combining borrowing power could also lead to paying off your mortgage faster, something lots of Aussies dream of.
Whether you’re thinking of buying your first home or your next home with mates, you may like to have a read of Aussie’s property guides which contain lots of useful information and for another insight into co-operative home ownership, you may enjoy this Aussie blog article on moving in with mates.
Of course, the ultimate guide is your Aussie broker, who’ll be happy to answer any questions you may have about buying a property.