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Understanding property co-ownership

Co-ownershipWhen it comes to buying property, co-ownership is a cost efficient way of both securing it, and maintaining it. While co-ownership has many associated benefits, it’s important to fully understand the ins and outs before making any commitment decisions.

So, let’s look into it further.

What Is Property Co-ownership?

  • When two or people own a share of a property.
  • Savings are combined with other people to establish a deposit collectively.
  • The buying power of all buyers are combined to be able to effectively borrow more money from a lender.
  • All owners will be paying off a mortgage rather than renting, or for investors, they begin to earn a rental income.

The biggest advantage, and aspect that makes co-ownership so attractive is that essentially you’re splitting all expenses into agreed upon amounts – usually dependant on how much each person is willing to contribute into the ownership. Rates, renovations and maintenance costs aren’t cheap, and having another person or several can make the world of difference to your bank account and profitability, both in the short and long term.

In addition to the costs of the upkeep of the property, the purchasing costs are also split between owners including stamp duty, pest and building inspections, legal fees and real estate agent’s fees. This ultimately means you do not need nearly as much money to purchase a home as you would if you bought one on your own. Your mortgage will also be paid off a lot sooner.

How Does It Work?

It’s called Tenancy In Common. Each owner can choose to bequeath their ownership to a party or person other than their co-owners. Ownership does not have to be equal, and there is greater flexibility in regard to conditions and agreements. Joint tenants own the property entirely together, meaning if an owner passes their share is transferred to the other owner(s) automatically with no control over the ownership rights.

Are there any risks involved?

There are always risks involved with any type of investment, which is why an agreement should be drawn up that includes all parties and their conditions of ownership before making decisions. There are a thousand possible issues that may arise throughout the course of the ownership, especially if you’re a co-owner among three or four others. Remember that life happens and people can change along with their personal circumstances.

Grants and Government Assistance for Co-ownership

First Homeowners Grants and other government schemes are all still available to people purchasing through co-ownership. How much you can save really depends on the individual circumstances of each buyer, and where you intend on buying.

Things You Should Know

1. How financing will work

Criteria is assessed as a group to determine how much can be borrowed and who will pay what. Everyone’s names will be listed on the title and mortgage and will be liable for each other’s debt. You must be prepared in case one person wants to sell up, or can’t make their repayments.

2. The Co-ownership Agreement

This sets out the legal obligations of each person in the co-ownership. It also needs to indicate how potential ownership issues will be dealt with like a debt plan in case things go south and one party is unable to pay their share.

3. Conveyancing

A conveyancer prepares and manages the transferring of the ownership between the vendor and buyer(s). The ownership will be transferred into the names of all co-owners, which includes about six to eight weeks’ worth of checks and processing. A lawyer then handles the conveyance of the property after the contract of sale is exchanged.

For more information on Co-ownership, read our article on Buying property as a couple.