What you need to apply for joint home loans

Thinking of buying your first home with your partner, parents or siblings?

Two women having coffee

For years, first home buyers have been pitching in with partners, parents and siblings to buy a home. And there’s nothing new about multi-generational households. Lots of families already live together for cultural reasons, but more are entering into joint home loans to increase their buying power.

For some people, it just makes sense to spread out the burden of saving for a deposit and making monthly repayments. However, there’s still a lot to think about before you start talking about borrowing money and building a new home with your partner or parents. It might be worth talking to your local Aussie Broker to work out which loan products are right for you.

Why pooling your resources together can make sense

Pooling resources with family members — or a friend — gives you greater buying power than you would have all by yourself. In other words, you have the capacity to borrow more money and pay off your loan sooner. This may allow you to live in a nicer area, enjoy a new property, or take your first step on the property ladder.

Co-purchasing a property with someone often means you can save up for a deposit sooner, or starting off with a larger combined deposit than you may have had by yourself. Not only can this potentially get you into a home sooner but could help save you money on lenders mortgage insurance (LMI).

Entering into a joint home loan with someone you’re close with usually means that you can comfortably talk about your concerns, and can trust one another. Being in a joint home loan with someone you know also means that you’re less likely to land in hot water if you miss a repayment — they’ll help to support you since you’re a team now.

What to ask first when you’re considering a joint home loan

Before you talk about suburbs, renovations, or mortgage insurance it’s important to clearly decide who this home will be for. Some of your first questions should include;

  • Who, if anyone, is going to live there?
  • What percentage of the property will each person pay for?
  • What if something goes wrong?

Whose home is it anyway?

So you’re thinking about buying a property with someone: it could be your fiancée, your dad, your older sister, or maybe all four of you together.

The first aspect to consider is whether everyone will buy as an owner occupier, or if one of you will only own part of the place as an investment. This is especially important for investors, who will need rock solid records of their property expenses at tax time.

Early conversations about this will also set clear expectations and boundaries around whose home it is — your dad might partly own your city apartment, but your partner may be uncomfortable giving him a set of keys to their home.

How much does everyone have to contribute?

The next step is to work out everyone’s ownership stake. This will normally be based on how much each person chips in, but it’s also important to discuss how regular expenses will be divided. The cost of a house is more than a deposit and repayments — there may be council rates, insurance, maintenance and unexpected costs to consider.

It’s important to iron out the little details before you sign any dotted lines or make verbal promises. Entering into hundreds of thousands of dollars of debt with someone can be strenuous on any relationship.

How do you get out of the home loan?

Now that you’ve decided who will live in your new place and who will own what percentage of it, your next job is to decide how you will legally own the property. It’s not unusual for a property to be owned by more than one person, so there are two main options available to you.

One of the option’s for joint property ownership is what’s called a ‘joint tenants’ structure. This may be a suitable option for families or couples (particularly married ones) buying together because if one co-owner passes away the remaining owners automatically inherits their share equally.

Another option is to own the property as ‘tenants in common’. In this arrangement, the stake each owner has in the property is fixed and typically based on the proportion of their funds they initially brought to the table – for example, if you contributed 70%, you will ‘own’ 70% of the home as long as you continue making your repayments.

In this legal structure, each co-buyer can own a different percentage of the property and — unless there’s an ownership agreement stating otherwise — each tenant in common can sell or give away their stake. This can be a handy exit strategy if your relationship sours, or should one owner want to give their share to their spouse or children when they die.

Is it time to see a lawyer?

There is one sure-fire way to reduce tensions around who lives in your property, who owns what and how you own it — have a formal co-ownership agreement drafted by a solicitor.

An ownership agreement sets out clear guidelines for a variety of ‘what if?’ situations. There will be arrangements for lots of scenarios, including;

  • what if one partner wants to bail out of the home loan?
  • what if someone can’t make their home loan repayments?
  • what if a co-owner dies?
  • what if someone wants to sell their stake?

Paying a solicitor will add to the cost of the property purchase, but it will be worth the cost to reduce disputes during tough times or, at least, give you some peace of mind.

Joint home loans with current homeowners

It’s not uncommon for first home buyers to enter into home ownership with someone who already owns a home, like their parents. It’s important to meet with a mortgage broker to weigh up the pros and cons of joint ownership.

Eligibility for grants

If you’re buying your first home, you may be eligible for two government schemes that may make homeownership a little easier. These are designed to help out people who are buying a home to live in but there are a number of criteria you must meet.

If you are buying a brand new or extensively renovated home — and you have never owned a home before — then you may be eligible for the First Home Owner Grant (FHOG). This grant entitles you to a one-off sum depending on your state or territory.

If any of your co-buyers have owned property before, you won’t be eligible for the FHOG.

Aussie can help with your joint home loan

Everyone’s situation is unique. If you want to get into your first place but unsure if you want to take out a home loan alone or with a partner, an Aussie Broker can help you with your decision. It’s worth speaking to an expert who can make sense of the mortgage mumbo-jumbo and talk you through what will be of to benefit you.

As an expert in all types of home loan products, your local Aussie Broker can also work with you to find the right lender and home loan product for your individual circumstances. And if you’re worried about costs, keep in mind that an appointment with an Aussie Broker is free.

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