Teaming up to buy your first home
Buying a house is one of the biggest financial commitments you’ll ever make, and scraping together a deposit isn’t easy. These days, it’s more common for people to join forces (and resources) to help each other onto the property ladder.
While co-ownership can be a smart option, it’s more complex than buying solo. You’re intertwining responsibilities, goals and finances with someone else, so it pays to understand what’s involved.
In this guide, we’ll walk you through three important things to know about co-ownership, how it works, and some things to consider before you commit.
1. Co-ownership could help you buy sooner
Buying with others can help you get on the property ladder faster. You can:
- Combine savings: Pooling your savings can help you reach a deposit goal faster.
- Share ongoing costs: Expenses like rates, insurance and maintenance can be split, so you don’t have to pay for it all yourself.
- Boost borrowing power: You might be able to borrow more than you could on your own, giving you more freedom to choose the house you want.
2. You can co-own a house with anyone
You don’t have to be partnered up to buy a house. You could co-own with friends, siblings, parents or other whānau members. The key is compatibility. You’ll be making major financial decisions together, so it’s important to share the same goals and expectations.
3. Co-ownership requires clear agreements
Co-owning is one situation where you’ll want more than a handshake. A formal property agreement sets out everyone’s obligations and outlines how you’ll handle situations like someone wanting to sell or move out. All parties should also seek independent legal advice.
How co-owning works
When you buy a house with others, there are two ways you can structure ownership:
- Joint tenants: This is most common for couples. Each person owns the property equally. If one owner passes away, their share automatically goes to the other.
- Tenants in common: More popular for friends who buy a house together. Each person has their own share, which usually reflects their contribution to the purchase price. If someone dies, their share goes to their estate and can be passed on to someone else (like a family member).
Other options to explore
Co-ownership isn’t the only way to buy your first home. You might also consider:
- KiwiSaver: Using your savings to contribute to a deposit.
- Low deposit home loans: Some options are available with less than 20% deposit.
- Shared equity schemes: Where a third party helps fund part of the purchase in exchange for a share in the property.
What to consider before you co-own
Owning a home with someone else is a big commitment. Here are some things to think about to help each of you make the right decision.
Are you compatible?
Compatibility is about more than just getting along. You’re making life-changing decisions together, so it’s important to share the same vision for your home and be aligned with your long-term plans. Consider your different communication styles, attitudes to money, and how you each handle conflict.
The key is to talk about these things before you sign on the dotted line. And if doing that feels awkward, trust your gut, it might be a sign that it’s not the right fit.
The shared mortgage
It’s a common misconception that you’re only liable for your portion of the home loan. In reality, when people take out a home loan together, they’re almost always ‘jointly and severally liable’ – meaning each person is responsible for the full amount. If one person doesn’t pay, the others must cover it.
Also keep in mind that joint borrowing can affect your ability to borrow in the future. If one co-owner defaults, it could impact the whole group’s credit rating.
Lenders will also look at your shared debt when assessing whether you can borrow more in your own name.
Ongoing costs
There’s a lot more to owning a home than the mortgage. Decide how you’ll split costs like rates, insurance, repairs and maintenance. Will you split everything evenly, or will one person contribute more (for example, because they paid a smaller deposit)?
You should also agree on how you’ll handle unexpected costs, like emergency repairs.
Insurance
Home insurance protects your investment and is usually a condition of getting a home loan. Anyone who owns a share of the property should be listed on the policy.
It’s also worth considering additional cover:
- Contents insurance - protects your personal belongings if they are accidentally damaged or stolen.
- Life and income insurance - could help cover home loan repayments if you’re unable to work due to illness or injury, or you pass away.
Everyone’s situation is different, and your needs may not be the same as your co-owners. It’s a good idea to explore the right insurance options to fit your situation.
Setting up a property agreement
It costs a bit upfront, but a property agreement could save you a lot of money and stress down the track. It can set out how you’ll handle tricky situations.
Talk to an independent solicitor about setting one up. A property agreement could cover:
- How the property can be sold
- How shares are valued
- Who owns chattels (shared items like appliances or curtains) in the property
- How proceeds are divided
- How decisions are made and disputes resolved.
Circumstances change, so anticipate the unexpected. Think about what you’d do if a co-owner wants to make improvements to the property, can’t (or won’t) pay their share of the mortgage, wants to move out or sell their share, or wants their partner to move in. Your solicitor can help you build these scenarios into your property agreement and you should also seek independent tax advice, so everyone knows where they stand.
We’re here to help
If buying a house with friends or whānau sounds like the right move, start by talking to the people you’d like to buy with. Show them this guide and talk about your goals, expectations, and how you see it working. Be honest about your finances and make sure everyone is on the same page.
You don’t need to have all the answers right away. Start with a conversation, then talk to your bank. We can help you understand your options and what might work for your situation.
Meet with an ANZ Home Loan Coach
They'll be in your corner at every stage of the journey.
Your coach will take you through your loan options and help with your plan of getting to where you want to be. They'll give you an approximate idea of how much you could borrow, work through your deposit options, and what your repayments might look like.
More helpful content
You could get a $5k cash contribution with your first home
If you’re a first home buyer and taking out a new home loan (minimum of $200,000) you could get a $5,000 cash contribution. The cash contribution is conditional on keeping your home loan with ANZ for at least three years. Lending criteria, terms, conditions and fees apply to this offer—.
Important information
ANZ lending criteria, terms, conditions, and fees apply. Interest rates and fees are subject to change.
This material is for information purposes only. We recommend seeking financial advice about your situation and goals before getting a financial product. To talk to one of our team at ANZ, please call 0800 269 296, or for more information about ANZ’s financial advice service or to view our financial advice provider disclosure statement see anz.co.nz/fapdisclosure.