Tips for successful financial ‘marriages’
The proportion of lending enquiries involving friends or relatives looking to purchase property together has climbed 300 per cent over the past six months, according to MyRate.com.au figures.
Kevin Sherman, managing director of MyRate.com.au, puts the increase down to the tightening of lending criteria since January and the desire to take up the First Home Owner Boost before the end of the year.
“It’s said you can’t put a price on friendship, but more and more Aussie mates and siblings are testing this theory by buying their first property together,” Sherman says.
“First homebuyers are realising a bigger deposit is now expected and they simply can’t afford it on their own. They also want to buy now while the First Home Owner’s Grant is still in place.
“Many lenders are demanding greater serviceability on the loan to assure themselves that it can be paid with many younger purchasers being asked to have mum and dad sign on as guarantors.”
Sherman warns that friends or families considering a joint transaction must treat it with caution.
“It can be a fantastic opportunity but what happens if something goes wrong?”
He offers these tips to Australians considering entering the market together:
- Agree upfront on all the terms for entering into this arrangement together, and make sure you have proper documentation to support all these decisions.
- If you’re confused on how to look at it, treat it like a pre-nup to a marriage.
- Envisage the worst case scenario. What would happen if your friendship breaks down? It probably won’t but you have to be prepared.
- Go in equally if you can; one party holding the power is recipe for disaster.
