Jun 12, 2018 3:54:37 PM

Buying a home with family

Topics: Mortgages, NZ Mortgage Adviser, Bank of mum and dad, Guarantor, Family 0

A combination of rising property prices and stricter lending criteria has made it harder than ever to buy a home or an investment property. As a result, many buyers are pooling their resources and buying property with family. As with any contract however, it’s important you go in with your eyes wide open. Here’s what you need to know.

 

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Teaming up with family

With property prices the highest they’ve ever been in most major cities around Australia and New Zealand, savvy buyers are teaming up with family to get a foot on the property ladder.

Buying a home with family has a number of benefits including:

  • Buying now rather than having to wait 2 or 3 years to save the extra deposit needed.
  • Bigger buying capacity means more choice in terms of location (a better suburb, closer to work) and style of property (a house rather than a unit or apartment).
  • Lower financial commitments and more manageable repayments for your share of the loan. 

On the down side, it’s worthwhile noting some of the disadvantages to buying property with family:

  • Things can get messy as circumstances change – you might decide to sell up but your family want to hold onto the property.
  • Financial situations change too and you could end up having to manage the full loan repayments by yourself. 

Top tips

To minimise the risk of any potential issues that could arise from buying a home or investment property with family, we recommend you do the following:

  • Seek professional advice – it’s vital you talk to a solicitor or conveyancer before entering into a co-ownership agreement. That way you’ll have a clear idea of how to protect yourself from financial risk.
  • Draw up a co-ownership agreement – sure, they might be family, but it’s still a necessary procedure. Drawing up an agreement that outlines how costs are split, what happens if one party defaults, and what happens if the loan needs to be re-financed, will ensure everyone is on the same page and hopefully reduce any disagreements further down the line.
  • Have an exit strategy – part of your agreement should include details like how long you intend holding onto the property for, and what happens if one party wants to sell up.
  • Talk to your mortgage broker/adviser to ensure you get the best advice on how to structure your loan and who should be the borrowers and guarantors. 

Other options

Remember, if joint ownership isn’t the best option for you, there are still other ways your family can help. Talk to a Mortgage Express broker/adviser about using a personal loan or gift from family members or having a family member act as guarantor so you can buy a home or investment property.

References:

http://yourloanhub.com.au/2017/06/buying-property-with-other-people-mine-yours-or-ours/

https://www.finder.com.au/buying-a-house-with-your-parents

https://sorted.org.nz/guides/family-trusts


Disclaimer:

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.

A Disclosure Statement is available on request and free of charge.