Buying a Property with a Mate? The good and bad

By Graeme Salt

With property purchase increasingly out-of-reach, many Aussies are turning to innovative ways they can get on the property ladder.

Much has been written about the ‘Bank of Mum and Dad’ where parents contribute equity towards a purchase.

But there are also innovative ways to which homebuyers are turning to make their dollars stretch out.

One way, mates will agree to buy a place together – typically they will be first home-owners.  Often first home-owners struggle to get enough of a deposit on a property and their individual incomes don’t stretch far enough.  But, combined, their purchasing power is much stronger.

But the downside of this approach is that there is no real separation of each other’s finances; all parties can see what repayments are being made and how much is in other’s offset account.  Critically, if one defaults on the loan, all borrowers are affected.

Macquarie have a more sophisticated offering whereby each borrower has their own offset with separate login – which gives everyone a bit more privacy.

While CBA and ING have taken this one step further by developing specific property share loans where loans and offsets are in each borrower’s names.

But, there is no way of getting around the fact that each borrower will have to be guarantor for the other’s loan.

Long term, borrowers will need to think about what happens if one wants to sell and the other doesn’t.  Or maybe, one wants to rent out their part of the property – what happens then?

I am currently, arranging such a loan for two sisters.  In this instance we are using Suncorp.  One thing that the sisters are doing is documenting who owns what percentage of the loan, their respective property share and an agreement with the family as to their own individual property plans.

Buying a property with a friend or family member can be a powerful means of increasing purchasing power.  But it’s important that borrowers know what they are letting themselves in for.

If you want to discuss this loan further, please contact me.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your lending needs, please contact him on 02 9922 5055.