Partnering up may be the solution for investors looking to buy property sooner, according to Australia’s largest independently-operated mortgage broker.
All types of coupling are encouraged by Mortgage Choice to break into the property market for shared ownership, including de facto couples, friends, relatives and work colleagues.
"Buying property with someone you trust in a co-ownership agreement can help ease the challenge of applying for, and repaying a home loan. It may also enable first timers to enter the market sooner and to take advantage of low interest rates and a wide range of competitive home loan deals,” Mortgage Choice spokesperson Belinda Williamson said.
The majority of first time buyers currently do enter into a purchase with a partner, with 66 per cent saying they would not buying alone in the Mortgage Choice 2011 Future First Homebuyer Survey.
"Sharing a home loan commitment with one or more people provides borrowers with the opportunity to split the cost of the property and the associated expenses, so that loan repayments are noticeably less than what they would be if they were buying solo.
“Another benefit is if the combined funds equate to a deposit of 20 per cent or more of the purchase price, it will negate the need for lenders' mortgage insurance,” said Ms Williamson.
Financing a co-ownership agreement is not that separate from traditional borrowing either, with lenders looking at the same criteria. Income, expenses, assets and liabilities are taken into account along with saving habits, employment history and a clean credit record.
"If the borrowers are not a 'couple', some lenders may assess their loan approval based on higher, individual living costs.
"In a co-ownership agreement the share of ownership can be split; that is rather than all parties owning all of the property together, they may own a percentage depending on their financial contribution. They may also be able to sell or transfer their share without having to sell the whole property,” she said.
Another advantage of coupling up is that each party can make a separate repayment to cover their share of the loan. However, both borrowers will be responsible for all of the debt. The remaining parties will be expected to make up any differences should one party default on a loan.