How to share a mortgage with a partner

happy couple on a joint home loan happy to get their official house keys

With Australian property prices reaching new highs everyday, most people may feel that owning a home may seem impossible. However, property ownership isn’t an impossible dream if it's done with someone else. 

Many first time home buyers work with a significant other, parents or siblings to save up to buy a home. Joint home loans help with your buying power. 

There are many advantages to buying a home with someone or several people. It’s an easier way to enter the property market which may seem impossible if you try to do it alone.

Joint mortgage

A joint mortgage (or home loan) can have multiple people on the loan, making the house more affordable for each person involved. However, remember that the fewer people involved in purchasing the property the greater share of it you’ll have.

Before applying for a home loan there are a few things you need to figure out with your co-owner.

Sharing the costs? You need ownership structure

Once you know who you are sharing the ownership with, the next step is to figure out how the ownership structure will be established. 

It could be evenly split, or someone will have a higher stake in the property. In co-ownership there are typically two types of structures: joint tenancy or tenants in common.

Joint tenancy means that everyone has an even share of the property. If someone dies, the surviving tenants take the whole property. Most couples or families follow this option.

Tenants in common have unequal ownership of the property. Meaning someone will have a higher percentage of the house to their name. For example, if you contribute 60%, then you’ll own 60% of the home. 

Knowing the ownership structure in a joint home loan will allow you to know how much to contribute to expenses.

Who’s paying for what? Shared responsibilities

Remember that owning a property comes with more than just a deposit and monthly repayments. There may be council rates, insurance, maintenance and possible unexpected costs. By figuring out how those expenses will be covered between the owners, everyone involved will have a clear understanding of their financial responsibilities. 

After all, entering in a joint debt of hundreds of thousands of dollars may be taxing on any relationship. So it is best that responsibilities are clearly defined beforehand.

Getting approved for a home loan together

Getting approved for a home loan doesn’t typically change when several people are looking to be on the deed. You’ll need to find a home loan that fits you and your co-owners. Then follow the usual steps that come with buying a new home.

Once you’ve saved a deposit, applied to any possible grants, gotten your documents in order, found a home you’re interested in—then it’s time to apply for a home loan.

Splitting up from a joint mortgage

Sometimes partnerships don’t work out, whether they are romantic or business ones. However, removing someone’s name from a home loan isn’t as easy as striking their name out or simply paying their share of the mortgage.

In Australia, by removing someone from a property mortgage, you (and whoever else owns the property) will need to re-qualify for the mortgage. This means you’ll have to meet the lender’s policy without the extra income and may need to pay Lenders Mortgage Insurance - if you find yourself needing to borrow more than 80% of the property value, that is.

Once you you requalify you’ll be able to:

  • Refinance and extend your mortgage
  • Increase your home loan
  • Get a different interest rate

Buying out of a joint mortgage

Before buying someone out of a joint mortgage, you’ll need to figure out how much the property is currently worth. Throughout the years the value of a home can go up or down and this will affect the buyout. 

Buying someone out tips:

  • Figure out how much each person’s monetary contribution to the property
  • Settle on a price or payments to be made
  • Figure out how much you’ll pay in stamp duty (this typically does not apply to divorces/separations)
  • Get legal advice 
  • Refinance and requalify for the mortgage.

There are a lot of possible factors to consider when it comes to buying property with someone, but don’t let that deter you from entering the property market. Use Mozo’s home loan guides to make buying a home a bit less stressful.

Home loan comparisons on Mozo - last updated 24 January 2022

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

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