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REIQ Journal : February 2010
REIQ Journal February 2010 21 With interest rates on the up, many home buyers are looking at alternative ways to enter the housing market. This, along with an increase of house prices, makes entering the property market a nearly unattainable task for many rst home buyers. Co-ownership loans - where groups band together to apply for a joint mortgage - are an option more buyers are now considering. A recent study found an increase of 34 per cent in the number of joint borrowers, with parents and children as the most popular group, followed by siblings, extended family, friends then colleagues. The study also showed that this trend has seen constant growth of around 8 - 12 per cent monthly, particularly in the cities of Brisbane, Sydney and Melbourne where house prices are higher. This gure continues to spike with each interest rate rise, primarily due to group nance being a more exible way to enter the housing market. However, borrowers need to be warned, a joint mortgage means that each party is "jointly and severally" liable for the home loan. This means that if any party fails to make a mortgage repayment, all other parties can be held responsible for the repayment. If one party defaults on their mortgage repayments and the other parties do not step in to pay the amount due, this will a ect the credit ratings of all co-borrowers. Basically, the age-old cliché, "don't mix pleasure and business", should be kept in mind and all parties involved need to know this is essentially a business agreement from the very start. It is important that all expectations are established prior to borrowing to account for potential contingencies and uncertainties that may arise in the future. The most common issues that arise when entering a co-ownership House mate - entering a co-owned mortgage agreement By Robert Projeski, Australian Mortgage Options mortgage include disputes over repayments, splitting of costs associated with the property, whether a party can be bought-out and whether or not re nancing or selling is a future option. The best way to avoid such issues is, regardless of their status as either friend, family or otherwise, each party should seek advice of a lawyer before entering into a co-ownership agreement. The agreement should cover issues such as when and how to sell, what happens if someone defaults under their mortgage, issues relating to the land title and how parties can be bought out. Seeking legal advice and obtaining a document that regulates the relationship between co-owners as tenants in common, and clearly identi es their rights and obligations, is recommended and available at a minimal cost. This is a small price for prospective buyers to pay for peace of mind and allow them ability to get their foot rmly set in the property market.
December January 2010