Top 10 things to look for in a co-ownership mortgage

Husbands and wives, boyfriends and girlfriends have been doing co-ownerships for years – it’s nothing new. However, what is new is that friends, family, and others can now buddy up to purchase a house together.

Being able to pool your resources is becoming increasingly necessary because property prices and interest rates are high, making it hard to service on a single income.

The key things to think about here are:

• You’ve got to have a 20% deposit – this is not a low deposit scenario.
• Everyone involved will be on the hook – co-ownership means co-liability.

We always recommend a property-sharing agreement, like a prenup about the property. This document should outline the responsibilities and expectations of each co-owner, including how the mortgage will be paid, what happens in case of default, how the property will be managed, possible trigger points to sell the property, who gets what when you go to pull it apart, etc. It needs to clearly define each co-owner’s contribution to the mortgage, including the down payment, monthly mortgage payments, property taxes, insurance, renovations, and maintenance costs. This is something that everyone should consult their individual lawyer on.

By doing this property-prenup, the big benefit is that it gets everyone on the same page – because it uncovers issues before you get too far down the track – you may discover from the process that this person is someone you can’t get on the same page with.

From an affordability perspective, there are two considerations: Who will live in the property? If all co-owners live there, then the mortgage calculation is easy. But if you’re not all in the same property, then there’s more than one set of living costs to be considered.

Things to look for in a mortgage co-owner

1. Creditworthy: They should have a strong credit history and a good credit score.
2. Financially Stable: Evaluate their financial situation, including income, job stability, and overall financial health.
3. Responsible: They should fulfil their financial obligations and make payments on time.
4. Rely on Professionals: It benefits both co-owners to seek legal and financial advice when entering a co-ownership agreement. They should want to be involved in creating a legally binding co-ownership agreement.
5. Shared Goals: Ensure that you and your co-owner have compatible goals for the property.
6. Communication Skills: You should be able to discuss financial matters openly, address any issues that arise, and make decisions together.
7. Compatibility: Consider whether your co-owner’s lifestyle, preferences, and living habits align with your own. A harmonious living arrangement is more likely to lead to a successful co-ownership.

We think the first step is to find your co-owner, apply for a mortgage to see if the financials work, and then sort the details to ensure that, financially and legally, you’re on the same page.