Making shared ownership of a home work
If you’re wanting to break into the housing market but finding it hard to on your own, one way around this is through co-ownership of a property. It’s an innovative approach that can provide you with a great deal of benefits, but as always, there’s a few things you should consider first.
What is co-ownership of a property?
Co-ownership is simply when two or more people have shared ownership of a home.
Such advantages of this method include:
- Not needing to save a 20% deposit by yourself. This is perhaps the greatest perk of them all, as you’re able to halve (if that’s how you decide to split the costs) the initial upfront costs together.
- Having greater buying power potentially creating a wider pool of properties to choose from.
- Sharing the typical expenses associated with buying a property i.e. stamp duty, legal fees, pest and building inspections, etc.
- Being able to own a property quicker. With a combined income, you may be able to to pay off your mortgage in fewer years, rather than the standard 30.
How does shared ownership work?
Shared ownership works with either one of the two options below:
- Tenants in Common: Each owner has a distinct share of the property (i.e. 50/50, 70/30) and when one owner passes away, shares go to their beneficiaries and not to the other owner/s. An owner can also sell or give away their interest in the property shared. This is typically the approach used between friends and siblings.
- Joint Tenants: Each owner typically has equal shares in the property, and when one owner dies, their shares automatically pass over to the surviving owner/s, with no control over the ownership rights. This approach is usually between a married couple.
What are the risks involved?
As with most things in life, there is a potential for risk. It doesn’t matter how close you are with your buying partner, a co-ownership agreement should be prepared, agreed upon and signed. With a fluctuating property market, disputes may arise on whether or not to sell the shared property, whether or not to refinance, mortgage repayments and more. It’s important to have a legal agreement you can fall back on, in cases of disputes.
It’s also important to have a backup plan in case either partner loses their job, has a serious accident or falls terminally ill. That strategy could be our Loan Protection Plan which can provide financial support in times of crisis.
When handled correctly, co-ownership of a property can be a win-win situation for both parties. Make sure you consider all the potential risks and always put your agreements down in writing. For more information about shared ownership, our Loan Protection Plan or more, don’t hesitate to get in touch with any one of our local ALI-authorised mortgage brokers.
Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.