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With property prices so high in many cities the prospect of buying a home is a long way off for many young Australians.
But there is one way you can get the funding you need to afford to buy a home. By teaming up with your parents, you can make yourself a low-risk borrower in the eyes of the banks and supplement a small deposit or low income. Just make sure you’re fully aware of all the ins and outs of doing so before you decide to buy jointly with mum and dad.
If you’re co-buying a home with your parents, they would typically use the equity in their current home to improve your borrowing power and the cost of repaying the loan would be shared between the two of you. However, if either you or your parents fall behind on repayments, the other party is responsible for covering their share.
There are two ways you can buy a house in tandem with your parents: you can be tenants-in-common or joint tenants.
Tenants-in-common is the more popular arrangement and allows you and your parents to divide ownership of the property in whatever way you like, such as 60/40 or 70/30. Under this ownership structure, if one party dies, their share of the property is passed on according to the terms of their will.
Under a joint tenancy arrangement, ownership of the property is split 50/50. If one joint tenant dies, their share of the property is automatically passed to the other joint tenant regardless of what their will says.
Joint or co-ownership is not for everyone. For the right family it's a great idea but you need to weigh the benefits and potential downsides carefully.
While there are undoubtedly downsides that you should be aware of when co-buying with your parents, there are a few simple steps you can take to minimise the risk of any problems occurring:
Get in touch with a mortgage broker and get some professional advice
If joint property ownership isn’t the right solution for you and your family, there are several other ways your parents can help you buy a house, such as:
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My parents are moving in to my home and selling theirs as need full time care. I have a big mortgage so what effects are their if they buy out my mortgage as co owners? We need to extend and renovate for them to live with me. If they do they will still have over a $1 m bank balance so pension may be affected?
Hi Mike,
Thanks for your inquiry
If you’re co-buying a home with your parents, they would typically use the equity in their current home to improve your borrowing power and the cost of repaying the loan would be shared between the two of you. However, if either you or your parents fall behind on repayments, the other party is responsible for covering their share.
Before you enter into a co-ownership agreement, make sure you get advice from a solicitor or conveyancer. This will ensure that you know exactly what you’re getting yourself into and what you need to do to protect yourself from potential risk.
Hope this information helps
Cheers,
Arnold