With first-home buyers facing an increasingly uphill task to get on the property ladder, co-ownership is becoming a more and more popular option, allowing potential buyers to partner with relatives, parents or friends to strengthen their buying position.
A new investment scheme from Joint Property Australia (JPA), which deals exclusively in joint-purchases of property, has produced a new calculation that ensures that buyers will “never pay more than 60% of the purchase price” on a single property.
JPA’s speciality is deals where offspring purchase 60% of a property, and parents 40%. A further point of difference is that JPA refers the loans to lenders separately, with each party to be assessed on their share of the loan only. “Essentially, the loans are separate,” says JPA managing director Paul Ebbels. “It’s one security, two loans.”
In JPA’s scenario, the children refinance the loan after three years up to 100%, and pay out their parent’s portion along with 3% capital growth.
Sydney-based broker Graeme Salt of Origin Finance has noticed a spike in co-ownership mortgages. He told Australian Broker
, “As valuations become so stretched, I think these sorts of loans will become more common.”
However, with more parties involved in a purchase, there is more potential for risk, thus brokers should be cautious for the sake of all involved.
“Whenever I have written similar loans I have always taken a ‘belt and braces’ approach to ensure that no one is left with their pants down,” says Salt. “I once even insisted on interviewing an elderly parent to ensure he understood the implications of going guarantor. At the time he was in hospital, but I wanted to ensure that no one was being coerced; thankfully he was a retired solicitor who new exactly what he was doing.”