coHome is our term for buying a property with other people. This is a great way for everyday Australians to get into the property market. Rather than buying a house on your own, you can easily join forces with friends or family and share the load. At the heart of it, it’s a shared home loan and a solid legal Co-Ownership Agreement to make sure everybody is fairly covered.
Whilst owning your own home is the dream of most Australians, for many this is a very hard thing to achieve. coHome enables people who may not be able to get into their dream home alone, the chance to join with other people to make this a reality. In addition, this may also broaden the type of property you can buy. For example, you may be able to buy where you want to live or a more appropriate investment property instead of sacrificing for where you can afford on your own.
Our research shows that to buy the median home in Australia you need to be in the top 10% of income earners. We need to work together to buy smart and merge our buying power.
coHome is for anybody who wants to enter the property market. Whether it’s a group of friends who would rather be paying off their own house than somebody else’s mortgage (while renting), or a parent who wants to help their child get into their first home. The most important thing is that everyone involved has strong levels of trust and know what they’re getting themselves into.
Friends, family, housemates, partners, parents, siblings… The options are endless. The important thing is to make sure you have a clear agreement in place so that you are covered in all cases.
The coHome website allows you to easily set up your coHome group, and manage all aspects of the mortgage application and building of the legal contract. We hope to make the entire process simpler so that you can decide if you want to coHome versus buying individually or continuing to rent.
Much the same as a regular home loan, a shared mortgage is issued based on the financial position of the applicants, with the added benefit of having multiple people’s income and assets to contribute.
There are some key points to note though:
From a bank’s perspective you are still joint owners and severely liable for each other’s loan on the property you share, so if one member of the coHome group defaults then it impacts on the others. In many circumstances, your coHome group partners may pay your monthly mortgage payments and you will need to decide how to return the favour, pay them back or, in the worse case, sell your share of the property. This will be detailed in a Co-Ownership Agreement between your coHome group.
Standard mortgage documents dictate that borrowers are typically in default 14 days after missing a single payment, even if only one person is in default. Some banks will even charge penalty interest on top of the existing rate from that point. In the extreme case a bank may serve an order for possession and sale of your property if payment is not forthcoming.
Again, this is why the Co-Ownership Agreement is so vital.
Between the coHome group you need to decide:
Ownership structure will be stated in the Co-Ownership Agreement. Any deviation from this should also be recorded, so when the property is finally sold (or kept as a pure investment property) each group member gets their fair share of the proceeds (be it rent or capital gains).
It’s fair to say, that if you’re considering buying a house with someone you must know and trust them pretty well (if not, maybe you should think twice!). The reality is, having a Co-Ownership Agreement is like taking out insurance. All going to plan, you'll never need it. However, in the case that something does go wrong it can mean that there is a fair and agreed upon approach to settle disputes.
The Co-Ownership Agreement also sets out a procedure for when one of the group decides they want their money out from the property. This can be done by negotiating with the others over buying the individual out (which may be done by re-mortgaging), finding a replacement person or by selling the property in full.
Joint tenants together own the entire interest in the property, but as individuals they own nothing. If one party dies, their share is transmitted automatically to the remaining owner.
Tenancy in common is a principle of property law in Australia that allows two or more people to own property together. Unlike joint tenancy, each party can pass their share in the property through their Will to beneficiaries of their choosing instead of to the other Co-Owners.
Tenants in Common can own land in equal or unequal shares. It is a more flexible form of property ownership and a Co-Owner’s rights and obligations can be set out in a Co-Ownership Agreement to ensure the parties are clear about the parameters of the co-purchase.
There are a number of ways that people can share the ownership of property. The one that we think works best at coHome, is a Tenancy in Common. This means that the Co-Owners (the “tenants in common”) each get an individual share in the same piece of property.
Tenants in common can sell their share at any time they like, depending on what has been written into the Co-Ownership Agreement (subject to whatever restrictions the Co-Owners agree should apply when one person wants to sell their share).
Tenants in common are usually also responsible for the entire property and any financial obligations (such as a mortgage) which attach to it.
There are a number of things to think about when building your agreement through coHome’s contract builder. The most obvious one is the ownership splits and how the property shares will be allocated – an even split between all parties is the simplest way to do it, but in instances when people will be contributing different amounts they may want different ownership splits.
The other major area to consider, is dispute resolution. Given a house is such a major asset and a mortgage is a large liability, there should be careful thought put into the preferred actions in the event of a dispute. For instance, if one person stops paying their share of the mortgage what is the process from here. Or if one person wants to sell their share in the property, do the other parties get first option to buy, and at what agreed valuation.
No, they don’t. It’s quite common, especially when a parent buys with their son or daughter, for only one party to live in the house. Or even for people to chip in to buy an investment property together that no one lives in. Our Co-Ownership Agreement accounts for all these scenarios, but it’s important to know before building the agreement what each member will be doing.
One important thing to consider in a scenario where some but not all of the Co-Owners live in the property will be whether they should pay rent. There is no hard or fast rule here, and it probably depends on the nature of the relationship between the different parties.
The Co-Ownership Agreement sets out a procedure for when one of the group decides they want their money out from the property. This can be done by negotiating with the others over buying the individual out (which may be done by re-mortgaging), finding a replacement person or by selling the property in full.
The following questions and answers are provided for general information only and may not be completely accurate in every circumstance, do not purport to be legal advice, and are not intended to be legally binding on coHome.