Mortgage exec talks about the risks of co-ownership
As first-time buyers look to get onto the property ladder, more and more people are resorting to pooling their resources to buy their first home. Lenders, meanwhile, are increasingly fielding enquiries from people who are considering the option.
It would currently take a median-income household 11 years to save for a standard deposit if they were able to put aside 15% of their income. But for people who are single, it could take double that time.
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Philippa Scott, Kiwibank mobile mortgage manager, said people were increasingly open to the idea of co-owning a house with someone other than a partner, spouse, or parent because it brings the possibility of meeting the deposit cost within reach by dividing that cost and the cost for paying the mortgage, RNZ reported.
Scott warned, however, that it was important for people considering co-ownership to know their rights from the outset. It is critical they get good legal advice, including setting out what will happen if circumstances change within the partnership.
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“It's people that you know and people that you trust,” Scott told RNZ. “What's really important about co-owners is people have an open and honest conversation with each other and get some good legal advice to set things up. Typically a mobile mortgage manager will interview all parties at the same time so we're having quite an open and transparent conversation about housing affordability and people's financial positions.”
Co-ownership also comes with risks, Scott said.
“You need to set up a roadmap or property sharing agreement about the ‘what ifs’,” Scott told RNZ. “What if people want to exit that situation, or what if one person wants to sell the property or do something different? You need a clear, documented guide for how to move forward.”
Scott suggested that people consider co-ownership as a way to investigate buying property later in life. Buying later had become more common among Kiwis as lifestyles and economic circumstances have changed widely.
“For clients a little bit later in life, borrowing with multiple people or friends and family may actually get them into a property sooner,” Scott told RNZ.
