With property prices remaining high across most of Australia co-purchasing has become an increasingly practical path into property ownership. 

Buying with a partner, family member or friend can give buyers a larger deposit and greater borrowing power than either party could achieve alone.

But co-ownership is a significant financial and legal commitment, and the arrangement works better when everyone involved understands the key considerations before they sign anything. Here are five things worth thinking about.

Joint tenants and tenants in common are not the same thing

There are two ways to hold property with another person in Australia. Joint tenants own the property equally, and if on5 things to think about before buying a property with someone else owner dies, their share automatically passes to the surviving owner regardless of what their will says. 

Tenants in common each own a defined share of the property, which can be equal or unequal, and that share forms part of their estate and passes according to their will. Couples commonly choose joint tenancy, while friends or family co-purchasers often opt for tenants in common to reflect their individual contributions.

Lenders assess all borrowers on the loan jointly

When two or more people apply for a home loan together, lenders assess the combined income, expenses, debts and credit history of all applicants. This can increase borrowing capacity compared to applying alone, but it also means that any issues on one applicant’s credit file or financial position affect the entire application. 

Each borrower is jointly liable for the full loan, meaning if one party stops making repayments, the other is responsible for the full debt.

What happens if one party wants to sell

This is one of the most common sources of tension in co-ownership arrangements and one that is worth planning for before it becomes an issue. If one owner wants to sell and the other does not, the options typically include one party buying out the other, agreeing to sell the property jointly, or in some cases, applying to a court to force a sale. 

Having a co-ownership agreement prepared by a solicitor before settlement, setting out what happens in these circumstances, can prevent a difficult personal situation from becoming an expensive legal dispute.

Each party’s financial position affects the other

Co-ownership creates an ongoing financial link between the parties that extends well beyond the initial purchase. If one co-owner falls into financial difficulty, misses repayments or has other debts called in, it can affect the shared property and the other owner’s credit position. It is worth considering not just whether the arrangement works today but how it might hold up if one party’s circumstances change significantly.

Get legal and financial advice before you commit

Co-purchasing works well for many people, but the arrangements that tend to go smoothly are the ones where both parties have taken independent legal advice and put a co-ownership agreement in place before settlement. 

A mortgage broker can help you compare your options and understand how the process works.

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