Buying property in New Zealand is tough, especially if it’s your first time. The average price in Auckland is a whopping $850,000 and many other cities aren’t far behind.
That’s why buying property with family has quickly become popular, particularly here in Auckland. In fact, Stuff recently reported that over half of first home buyers have parental help of some sort.
With that in mind, to celebrate International Family Day on May 15th, we’ve put together our advice for buying property with family
Having a guarantor for your loan
If lenders won’t help you buy or you haven’t saved a large enough deposit, having a family member (usually a parent) as a loan guarantor is a good option. As a guarantor, your family member may have to offer their assets as security for your loan and they will be responsible for making your mortgage repayments if you can’t.
Before buying a property with a guarantor, both you and your family member should speak to a mortgage adviser and conveyancer to make sure you understand what you’re signing up for, and put a plan in place to protect yourselves if anything goes wrong. Make sure you check out our blog where we answer some common questions around investment property finance.
Buying property directly with a family member
Buying property with a family member or friend is another popular way to make getting into your own home easier. However, lenders are often cautious of agreements like this which may make it more difficult to secure a mortgage – speak to a mortgage adviser to improve your chances.
When buying with another person, it’s also important to make sure they’re someone you can trust to be financially stable and reliable. That friend or sibling who bounces from job to job and is always up for a good time may be fun to be around but they might not be the best person to buy property with.
Protecting yourself when you buy with family
No matter how much you trust whoever you’re buying with, it’s essential that you do everything you can to protect yourself when you buy property.
That means you should create a comprehensive co-ownership agreement that covers:
- The amount that each party is contributing to the purchase.
- Who is responsible for managing which aspects of the property.
- What happens if one party defaults on their mortgage repayments.
- How decisions are made about the property.
- What happens if one party wants to sell and how any gains or losses are divided if you do sell.
- Whether insurance is required to cover mortgage repayments if one party falls ill, dies or loses their job.
- How disputes are managed.
Robust agreements are important because usually if one party defaults on their mortgage repayments, the other is responsible for making them.
To make sure you do everything right, you and your family should visit a mortgage broker you can trust to go over the details and secure the right finance. Get in touch with the team at Money Empire to get started.
Happy International Family Day!