Over the last year as interest rates have risen along with the 'test rate' which banks use to assess your ability to service a mortgage we're finding we are having more conversations with clients about the levers we can pull to increase the amount they can borrow.
One of those levers is 'co-ownership'...Or put simply buying with a friend or family member. You may have seen ads on TV about this recently and it's something we are doing more and more of - people are partnering up with friends, siblings and other family to buy their first home. And why not? With the right advice and structure from the beginning, it can be a great option for many people.
There is a common misconception that only some banks allow this type of arrangement - but that's simply not true! Almost all banks will assess an application like this, as they would any other type of joint application.
So a few considerations if you're thinking about buying with a friend or family members...
Open Communication and Shared Mortgage Goals:
Effective communication is crucial when considering co-ownership and shared mortgages. Discuss financial situations, goals, and long-term plans with your potential co-owner(s).
Aligning on mortgage expectations, affordability, and repayment strategies is essential and your mortgage adviser can assist with these discussions!
Mortgage Structure:
As co-owners, you will be jointly responsible for the mortgage repayments but it's a good idea to chat to your mortgage adviser about the best way to structure your accounts and the mortgage to make sure everything is as easy as possible to manage.
Legal Considerations:
To safeguard the interests of all co-owners and maintain a harmonious co-ownership arrangement, legal guidance is essential. Consult with a solicitor experienced in property law to draft a co-ownership agreement. This agreement should address mortgage obligations, ownership shares, contribution proportions, and dispute resolution mechanisms. We can put you in touch with some awesome solicitors in this space!
Exit Strategies
Anticipate unforeseen circumstances and develop exit strategies. It's a good idea to think about how the co-ownership agreement will unwind in future. Will one party sell their share to the other? Will you sell the property and go your seperate ways? Your solicitor can help with this and having these discussions between co-owners before purchasing will make things nice and clear from the get go!
Co-owning a house in New Zealand through shared mortgages provides an alternative path to homeownership in a challenging lending environment. Through clear communication, advice from a mortgage adviser, legal guidance, and some basic financial planning, co-owners can navigate the process successfully.
By leveraging the benefits of shared mortgages, you can increase your chances of owning a property while sharing the responsibilities and joys of homeownership with a trusted co-owner.
Chat to the team at My Mortgage today to see if co-ownership could be right for you!