Recently we looked at the pros and cons of buying a property by yourself, now we are going to discuss the option of buying with other people.
Is purchasing your own home by yourself out of the question due to your financial situation? You’re not alone.
Recently we looked at the pros and cons of buying a property by yourself, now we are going to discuss the option of buying with other people. As many Australians are unable to afford a home loan individually, many are moving towards the idea of property co-ownership.
Property co-ownership enables you to combine your money with other potential buyers for a deposit. You also use your combined borrowing power when applying for a home loan and expenses such as ongoing fees are split between the buyers.
Although this method does eliminate some of the financial pressure, there are certain risks you should consider before signing the dotted line.
Buying with strangers
You may have very specific goals in mind for this property and if you and your co-buyers do not have the same objectives, it could result in serious issues down the track. Co-buyers do not necessarily have to be family members or close friends, but you should either already know them or get to know them before going ahead.
Make hard copies of legal documents
“A verbal agreement is only as good as the paper it’s written on” – This statement definitely applies to this situation. It doesn’t matter how well you know your co-buyers, you need to get every agreement and decision in writing. Not only will this protect you, but everyone will know their responsibilities and entitlements before signing the contract.
Understand that property joint ventures will impact on your ability to borrow in the future. Even if on the title you are tenants in common, the lender will expect you to be able to service the full loan when you apply for a new loan in the future.
Purchasing a property with another person may seem like a good idea in the short term, but property ownership is a long term commitment and needs to be considered carefully.