Aviser Finance recently had the pleasure of meeting siblings, Brittany and Harrison, and helping them find a lending solution suitable to their future property investment. Opting for a ‘property share’ arrangement, this simple yet beneficial lending solution is best suited for friends or family who want to purchase property together while keeping finances separate. In the latest Aviser Finance blog, Director Martin Ryan unpacks the concept of ‘property share’ arrangements and talks to Brittany about stepping onto the property ladder for the very first time.
In today’s real estate market, the idea of sharing property is very popular. We share our homes with strangers holidaying on Airbnb, and resort to classified websites like Gumtree and Flatmates to share our rooms. So, a loan structure that allows would-be homeowners to buddy up and buy property together while keeping finances separate sounds like a smart option.
For those unfamiliar with ‘property share’, let me explain. ‘Property share’ is a lending solution best suited to people looking to purchase property together while keeping their financial affairs separate. Recently, I had the pleasure of meeting siblings, Harrison and Brittany, who were looking to invest in their first property together. After discussing their financial security and future investment plans, we decided on ‘property share’ as the best way to maximise their savings without jeopardising each other’s financial credit. To explain ‘property share’ in more detail, I’ll be discussing their process below.
In Brittany and Harrison’s case, we established two loans: one in Brittany’s name with Harrison as the guarantor, and one in Harrison’s name with Brittany as guarantor. With both named as each other’s guarantor, each are named as title holders, since the mortgage securing each loan must be given by both title holders. In addition, Brittany and Harrison do not see each other’s loan payments – but can have an offset account if they choose.
The most important difference between standard joint mortgages and property share loans is if one borrower defaults, the other’s credit file is not affected. Unlike most loans where if one-person defaults on their share of the loan repayment, the responsibility to repay the full loan falls upon the other mortgagee. Failure to do so can damage both credit files.
Being a borrower on a loan half the size can also enhance your borrowing capacity if you want to borrow again later in life. In standard joint mortgages, the entire loan is associated with both individuals.
Property share arrangements don’t have to be split 50/50, either. These structures can accommodate various borrowing capacities and deposit values and can work well for ‘buddy-up’ buyers on different incomes. Both borrowers will also receive independent legal advice on the ‘property share’ – this is required by the lender. This process is helpful in establishing how the borrowers will respond to different changes in circumstances should they occur. It is important for the sake of the relationship between borrowers to understand how either a planned or unplanned exit from ownership will play out and a legal agreement is a good way of articulating it. Lenders also require legal advice as a security measure, so they too understand the repercussions of providing guarantees.
Looking at their financial security, future ambitions and first-time investment plan, I advised siblings Brittany and Harrison on kickstarting their investment future with the ‘property share’ structure. Recently I sat down with Brittany, where we discussed her decision to enter the property market and how ‘property share’ would help her prepare for future investments.
M: As first-time buyers, why did you decide to enter the property market?
B: I’d been looking to buy a property myself for a little while, had some good savings behind me and thought it would be a good way to invest in my future. However, I soon discovered the difficulty in obtaining a large enough loan as an individual to get a good property. Harrison and I came into a small amount of inheritance from our nan and we thought it would be a great opportunity to invest that money into a property together. By going in together we were able to get a shared loan, which helped us buy the property that we wanted.
M: Had you heard about ‘property share’ before your visit to Aviser?
B: No, we hadn’t. We thought that maybe we would share a whole loan, but the ‘property share’ arrangement worked out to be better than expected.
M: What are the benefits of property share?
B: It has allowed Harrison and I to each take out a much smaller and manageable loan, whilst still being able to combine our buying power to be competitive in the market. The loans are independent of each other, meaning our ability to repay our own loans doesn’t have any impact on the other – so we don’t affect each other’s credit rating.
M: How would you describe the Aviser support you received?
B: You and the team were extremely supportive throughout the whole process. Everything was explained clearly to us, and we were made to feel comfortable in asking questions about the process. The communication from all members of the team to Harrison and I was consistent and clear.
M: What would you say to someone who is thinking about property share?
B: Do it! It gave us an opportunity to get into the property market at a young age (I’m 27, Harrison is 24) and allowed us to purchase a property that we believe is a great investment for both of our futures. ‘Property share’ also allows us to pay down a much smaller loan in comparison to what we may have had to have taken out if we had bought separately. This allows us to save money and lets us maintain our lifestyle that we’ve grown accustomed to. It also helps mitigate the problem of saving a large enough deposit to avoid LMI.
Aviser Finance are South Melbourne’s mortgage match-makers. Martin Ryan and his expert team specialise in finding loan solutions for individuals based on their financial needs, lifestyle, circumstances and future investment goals. We are here to help you kickstart your financial journey while supporting you every step of the way.