Buying your first home with friends is a viable option and an exciting time.
There are benefits for first home buyers with stamp duty payments if the purchase is for an existing or new home.
- If the contract price is $600K or less, you are eligible to receive the First Home Buyers Duty Exemption
- If the contract price is between $600K -$750K you are eligible to receive the First Home Buyer Duty Concession
The First Home Buyers Guarantee (FHBG) scheme is also available for eligible home buyers. To qualify below are some criteria:
- Australia citizen or permanent resident at the time of applying
- Earning up to $125K for individuals and $200K for joint applicants as show on your previous years Notice of Assessment (NOA)
- Intend to live in the property being purchased
- Need to have a minimum deposit of 5% of the value of the property to be purchased
- Refer to each Property price cap for each State/Territory https://www.housingaustralia.gov.au/support-buy-home/property-price-caps
But it’s imperative that you approach it with careful consideration and planning. Some of the key points to consider are:
- Legal Structure
Agree on the structure of co-ownership. One option is joint tenancy where both parties have equal ownership and rights to the property. Another option is tenants in common, where ownership is based on a specified percentage.
Two of the main differences between the two of these options is that the joint tenants have an automatic right of survivorship whereas tenants in common don’t have automatic right of survivorship. So, if one of the tenants dies, the surviving tenant owns the deceased tenants share. Joint tenants cannot sell or transfer their shares without the consent of the other party. Whereas tenants in common can sell or transfer their shares without the consent of the other party.
- Financial Arrangements
Discuss how you will split the cost of purchasing the property such as the deposit, mortgage payment, ongoing expenses (utilities and maintenance, rates etc) and any other future cost such as renovations or upgrades. Having a clear agreement in place can help prevent misunderstandings in the future.
- Loan Application
When applying for a mortgage, the lender will assess both parties’ financial situation. Be prepared to provide evidence of income, assets, and expenses/liabilities. Remember both parties are equally responsible for the mortgage repayments so both parties need to be comfortable with the financial commitment.
- Exit Strategy
Plan for the future and discuss possible circumstances such as one if one party wants to buy out the other, options of renting out the property or if one party moves out.
- Legal Advice/Financial Advice
It’s highly recommended to seek legal and financial advice before entering a co-ownership arrangement. They can both help you understand your rights and obligations and ensure you are both making informed decisions.
Reach out to us to discuss your options and be guided as to what is required.