Co-ownership: Buying a Home with Family or Friends

Buying a first home in today’s market isn’t always easy, and for many prospective home buyers it can feel like there are limited options. While house prices keep going up and every day costs swallow up more savings, it can take several years to save enough of a deposit to get onto the property ladder.

One way around this challenge is with co-ownership: Combining resources with family or friends to save a deposit faster and potentially borrow a larger amount. For many prospective home buyers, coownership offers the opportunity to get onto the property ladder sooner and into a first home faster.

A different way to buy a first home Co-ownership, buying a home with family or friends, could be a solution for home buyers who are not in traditional relationships, who fall short of income requirements, or who do not meet deposit thresholds on their own. Team up with a sibling, a best friend, or an auntie to combine savings and reach a deposit goal sooner; borrow a bigger mortgage to buy a property that fits everyone’s needs; and share the ongoing costs of owning a property, such as maintenance, rates and insurance.

Someone trying to a buy a home on their own is often disadvantaged, having to rely on a single income and access to just one KiwiSaver Withdrawal and one First Home Grant (if eligible). With co-ownership, you may be able to pool all of your KiwiSaver Withdrawals and First Home Grants (if eligible) to gain even bigger savings and achieve the necessary deposit.

Sharing ownership of a property
Buying a home with family or friends isn’t all that different to getting a standard mortgage. Each co-owner is a borrower responsible for paying a share of the mortgage and owning a share in the property being bought. Together, the co-owners decide how the mortgage gets structured, how much each co-owner will repay, how ongoing costs will be split, and what happens in the event the property is sold. All of this important information is outlined in a property sharing agreement, a legal document that all co-owners sign and agree to.

When it comes to getting finance, most co-ownership arrangements work on a joint home loan structure, whereby each co-owner is jointly and individually responsible for the full cost of the mortgage. In most instances, co-ownership mortgages require the co-owners to save at least a 20 per cent deposit of the purchase price of a property they are considering buying.

Answers to your co-ownership questions
Co-ownership isn't for everyone. It is important that all co-owners get financial and legal advice before agreeing to this type of arrangement. In co-ownership arrangements, it is not uncommon for disagreements or disputes to arise, particularly if any co-owners do not fully understand the implications of a legal contract. Co-ownership agreements are legally binding, therefore can clarify any issues that may potentially arise. Before deciding on co-ownership, investigate whether it is right for you. Work with a Mortgage Broker who can help you determine if co-ownership fits your unique situation.

The views and opinions expressed in this article are intended to be of a general nature and do not constitute regulated financial advice for an individual retail client. You should seek professional advice before taking any action in relation to the matters dealt with within this article.