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We know that sometimes the best laid plans go wrong. There are measures you can take to ensure that your best laid plans stay on track.
Firstly: Clarify your objectives
Understand why you are buying a house with someone, be it a relative or someone else. They could include the following…
A business proposition
When buying a house with someone in a co-ownership situation, it is often best to look at it as a business venture or opportunity to start your own asset base. As with a new business you need to have a business plan (aims and objectives), a contract (co-ownership agreement) and the patience to see your business (asset/house) grow (equity). If you tackle home co-ownership from this point of view, you will adopt a mindset that will help protect you from jumping in and simply buying without strategies. Remember: PLAN, PROTECT, PROSPER! The 3 Ps of home co-ownership.
Frequently Asked Questions
There are always questions that need to be asked so we have anticipated a number of them that might help you better arrive at a decision.
1. What is a Co-Ownership Agreement / Co-Ownership Contract?
A Co-ownership agreement or contract is your essential ‘business’ tool. It is a contract that makes provision for ‘tenants in common’. Do not go another step forward without it! A well thought-out agreement will minimise risks that may arise in a co-property ownership situation. We have a legally prepared contract that covers essentials and helps protect each party in the arrangement. You can have peace of mind once you have this in place CO-OWNERSHIP CONTRACT.
2. Some of the areas covered in the Home Addressed Co-Ownership Agreement?
We have considered many aspects of a co-ownership arrangement and these include:
3. What if I want to co-buy but don’t know anyone with whom to buy?
Home Addressed is designed to help you solve this situation. Have a browse at our Co-Ownership page someone and see if there is someone who may be right for you. There is extensive information and it is free to read profiles. Should you wish to contact them either send them an Opportunity Knock , which is a free alert service or send them an email buy purchasing a Key.
4. What if I want to sell out?
Consider if this is really what you want to do. Buy doing this you may be losing your share in future equity. There are lateral ways in which you can still hold on to your share of the property if you wish. Alternatively, you may need to sell and there are ways of achieving this too.
5. Do I need to obtain independent legal advice?
It is advisable to do so.
6. How does group finance work?
Because Co-buying is enjoying great popularity ( According to the Daily Telegraph, there has been a "300% boom" in the rate of buyers opting to take on a mortgage with a mate in the last 6 months.) some lending institutions are wising up and constructive loans more in line with a co-ownership set up. Home Addressed can offer assistance in this area Co-ownership Homeloans
Please note that co-borrowers will be jointly and severally liable for each other's obligations under the loan.
7. What is the First Home Owners Grant?
First Home Owner Grant
The First Home Owner Grant provides eligible first home buyers with a grant. This grant is not means-tested nor is it restricted by the price of the property. It varies depending on the State in which you live.
The Grant is an on-going scheme.
VIC: First Home Owner Grant
8. Can all co-owners receive the First Home Owners Grant?
As it stands, only one party may claim the FHOG, however, both parties must be eligible.
9. What is the Home Saver Account? NB...this scheme has been discontinued!
The Home Saver Account is a Rudd government initiative which assists potential first home buyers to save up for a deposit. The Saver account can be set up with a minimum upfront contribution of $1000. The scheme allows you to pay a lower tax rate on up to 10% of your income, while the government will provide a 17% contribution on the after-tax contribution of up to $5000. This means an individual contributing $5,000 will receive a Government contribution of $850.
Read more about this on this web address:
The funds in the account will be invested to gain compound earnings but will be taxed at 15%. However, the full amount of your account will be released tax free if it is used to purchase or build a first home to live in.
In an attempt to combat the escalating problem of housing affordability the Government has confirmed that people who buy property together under a co-ownership framework will be able to aggregate their loan accounts to substantially increase their windfall to purchase a home jointly.
David Koch’s review: http://au.pfinance.yahoo.com/b/davidkoch/69/rudd-governments-new-savings-scheme
10. What is the difference between tenants in common and joint tenancy
Joint tenancy is when two or more parties hold property in equal shares. If one owner dies, his or her share will automatically go to the other partner(s), irrespective of any provisions made in a will. This kind of ownership structure is used most commonly by married couples.
Tenants in common is a type of co-ownership structure where two or more parties own separate interests in a parcel of land (which may be equal or unequal). The laws of survivorship do not apply to tenancy in common. Should one party die, his or her share of the property can be left to anyone they have nominated in their will. Home Address uses this legal structure in our contracts.
11. Mortgage Default: What happens if I am a co-borrower and one of us defaults?
Be aware that you are joint and severally liable for each other’s loan on the property you share, so if one defaults then it impacts on the others.
Standard mortgage documents dictate that borrowers are typically in default 14 days after missing a single payment, even if only one co-borrower is in default. In addition, a bank may impose a designated penalty interest on top of the existing rate from that point. Worst case scenario the bank may serve an order for possession and sale of your property if payment is not forthcoming.
Home Addressed makes provision for this scenario in our Co-Ownership Agreement, each co-owner has a power of attorney in their favour so that a co-owner can take over a defaulting party’s share in order to either refinance or sell out. All costs associated with such default come out of the defaulting party’s share.
12. What happens if I don't have a co-ownership agreement? Can I force my co-owner to sell?
If an agreement is not in force and both parties cannot come to a common sense resolution then things can get messy. At this point you would contact a solicitor who will advise you to seek action for the partition of the property whereby you will apply for an order of sale in lieu of partition.
Avoid this scenario at all costs by signing a contract from the outset!
13. What if I have no-one with whom to co-buy?
Home Addressed is set up specifically to meet this need. We have a growing database of people in your position who would like to get that foot in the housing market. Have a look through our database and if there is someone with whom you might be compatible, contact them. If not, keep looking, as new members sign up regularly!
14. How do I know if my co-buyer and I are compatible?
Home Address offers a Myers Briggs compatibility test administered by a qualified psychologist. We offer this service as a way of alleviating concerns regarding this issue.
15. What if I don’t feel comfortable with my initial meeting?
We have an ice-breaking service presently for Melbourne metro but will be expanding this to our major cities. We will meet with you and your prospective partner and help you to feel comfortable looking at issues, pluses and minuses etc over a coffee
14. How much is a co-ownership contract?
A co-ownership contract is $800 and allows up to four people to use it.
Don’t be afraid to take the plunge, you’ll never look back. When confronted with doubts and naysayers remember that you are building a future for yourself…a mortgage shared is a mortgage halved and a dream fulfilled!