In today’s property market, more Kiwis are joining forces with friends to build a deposit sooner. This can seem like a great way to buy a home, but the financial and legal implications are important to consider.
1. Choose your friends wisely
Talk to your friend about their financial history first-up. Defaults and loan arrears can affect your ability to get a loan, so you want to put everything on the table before you apply. It’s also important to be aware of your responsibilities as co-owners. If one person can’t keep up with the repayments, the other will be liable for the mortgage.
2. Settle on a structure
Did you know there’s more than one way to own property? “Joint tenancy”, which is how couples usually buy together, gives you an equal stake in the property. So, if one owner dies, their share automatically passes to the co-owner. “Tenants in common” is different – you own a specific share in the property, and this can be sold, given away, or is passed on to your beneficiaries if necessary.
3. Government grants
One key benefit of buying with friends is pooling your incomes, KiwiSavers and government grants – but there are limitations to be aware of. If you buy an existing home, you may be eligible for a $5,000 bonus through the First Home Grant. If you buy land to build on, you could receive up to $10,000.
4. Get a lawyer
Make sure you have your own lawyer to help establish the fine print. If you’re buying with somebody else, a co-ownership agreement will help to protect everyone if things don’t go to plan.
5. Speak to a mortgage broker
An experienced mortgage broker can help to navigate all your options, so contact your local Mike Pero Mortgage Adviser today.