Co-Ownership with friends and family: How it works

Struggling to save a deposit? You aren’t alone. With the rise in house prices and interest rates, we are also seeing a rise in co-ownership of properties. This is where family members (such as siblings or cousins) or a group of friends team up to buy a property together.  

This allows home ownership to become more affordable for the individuals and speeds up the process of getting on to the property ladder. For some, this allows them to own property when they might not have been able to otherwise.

While co-ownership definitely has its perks (such as lower repayments),  there are a number of things to consider when teaming up to buy a property. You have to have a sound legal contract in place to cover everyone if things go wrong, and it’s absolutely crucial for all parties to get the right advice before embarking on this journey. 

Let’s take a look at some of the things to consider before heading down the co-ownership route. 

Changes in circumstances: As people go through their lives it’s likely things will change. What will happen if someone wants to sell? If their lifestyle changes with a partner or kids? Understanding what will happen to the property if these things happen is key. 

Ownership Structure: How will the ownership of the home appear? Is everyone contributing equally? Do certain people own more of the home than others? Who will live in the home? What will happen if maintenance and renovations are needed? How will this be managed?

The Legal Aspect: Getting advice from a lawyer is crucial! It’s important to remember that all co-owners are jointly and individually liable for the loan, so trust and confidence in your co-owners is essential, as if they stop making repayments you will be liable. A well-drafted property sharing agreement needs to be in place that covers all aspects of co-ownership.

The Financial Structure: Your mortgage and repayment structure needs to be clear and agreed upon by all parties. A mortgage advisor can help prepare this and ensure that everyone is on the same page in terms of repayments and how the mortgage structure works. It is important to note banks view co-ownership very differently so it’s crucial to go to the right bank with the right policy to optimise your potential when purchasing with several owners.

Communication: Clear communication is key to successful home co-ownership. All parties need to be able to openly discuss challenges that may present themselves and be able to navigate and work through any conflicts. 

If you can navigate the above challenges and have a great group of people who you’d like to co-own with, then co-ownership is a fantastic way to make it on to the market sooner and help to increase your equity for future property. With the current higher interest rates and properties in the Queenstown market still on the higher side, it’s a great way to be able to own a home at a fraction of the cost. 

If you’d like to discuss how co-ownership could work for you, then get in touch with our team today and we can take you through the process.