In many countries it’s common to see people buying a home with friends or family and it’s starting to become more common in New Zealand now too.
It is also becoming more common to hear that things have gone wrong!
The key thing is to go into this with a clear understanding of how the arrangement will work and what happens if someone wants to exit the arrangement. Too often people are too casual when entering these arrangements and they “think” that there is an agreement, but it’s not until it’s tested that they find that the other people in the arrangement had a different expectation regarding how things work.
To avoid any of these types of problems we suggest that you document things formally using a property sharing agreement right at the start.
Getting the agreement documented correctly will ensure that there is no disputes about what the expectations were, but you also need to ensure that the mortgage is established correctly so it can be easily managed too.
Get The Right Mortgage For Shared Ownership
When you get a mortgage for a property, and especially when there is shared ownership (more than one person or family involved) then it’s important to get the right mortgage.
What do we mean by the right mortgage?
People often think that mortgages are all the same, but they are not.
When you are buying with other people you need to consider a few more things that may not be considerations when buying on your own:
- The ability to manage your own loans can be important as you may want to pay off your portion of the mortgage faster or slower depending on your personal situation and any changes along the way.
- Avoiding any extended liability is something that many people do not think about, but if the other people involved were to take out a credit card or loan with the same bank then you want to know that you are not going to be liable for that debt – and often people are linked into all debts.
These are just two of the key things that should be considered when arranging the mortgage, and unfortunately they are very often overlooked.
Where Advisers Can Help
As advisers we are trained on how to help when people are buying a home with friends and/or family.
We have seen the issues caused when things have been done wrong, and we have identified the key things that make managing the process so much easier.
We know the importance of having a good property sharing agreement, and while we cannot arrange the agreement we have managed to source a discount that you can take advantage of.
Plus we know how to arrange the right mortgage. When you go to the bank directly you are only able to be offered the loans which that specific bank offer whereas being advisers we have access to a range of options and can select the mortgages that work best for these situations.
If you are considering shared ownership then you should contact one of the team and discuss what you are planning before you commit to anything.