As the old song goes, “love and marriage goes together like a horse and carriage.” While it might still be true, these days there might be more pragmatic reasons to get hitched – particularly when you’re living in the major metropolitan cities where housing affordability has priced many young singles out of the market.
According to a recent Bankwest survey¹, it would take the typical single, first time buyer more than six years to save a 20 per cent deposit for a unit across eight capital cities. In Melbourne it would take a single, first time buyer 8.6 years to save a deposit for the median unit.
That’s a long time to save for a home unit. So is it worth shacking up with someone in order to get into your own home sooner? While actually taking the plunge may not be necessary, teaming up with a partner, friend or sibling might be a way of getting on the property ladder.
Mortgage broker Ross LeQuesne, who owns an Aussie store in Parramatta in Sydney‘s west, said banks make lending decisions based on the serviceability, or the ability of the borrower to pay back the loan.
“Two people can save a deposit much faster than one person can,” he said. “And two incomes means the ability to service the debt is increased.”
He said banks are really only interested in serviceability, and do look favourably on loans which are taken out by two people.
“Banks will avoid what is termed “borrowers of convenience”, that is any person who has signed as a party to loan just so it will get approved,” he said. “Under Responsible Lending Guidelines, they want to be certain that both parties will be servicing the debt.”
Mr LeQuesne said people thinking about buying property with a friend or family member, which will be termed as a “Tenants in Common” arrangement, need to ensure they have planned for any breakdown in the relationship.
“The situation can be messy if the relationship is ended, whether that’s a break-up or a falling out, so people need to plan for that,” he said.
“Make sure you get some good legal advice and you’re both covered if one person wants to get out of the loan.”
What is a Tenant in Common?
Tenants in Common is one of the ways to hold title, to own property, by two or more individuals. Sometimes it is referred to as Tenancy in Common.
There is no limit to the number of individuals who can hold title to one piece of real estate. A property held by tenants in common can be owned by two owners or 100+ owners. They do not have to be equal shares, for example one tenant can own 30 per cent of the property while the other owns 70 per cent. If one of the tenants passes away, their share goes to their estate not to the surviving tenant (unlike in a “Joint Tenant” arrangement).
¹2nd Annual First Time Buyer Deposit Report July 2010 – http://www.bankwest.com.au/library/scripts/objectifyMedia.aspx?file=pdf/60/88.pdf&str_title=First Time Home Buyers Deposit Report 2010.pdf