Buying Property with Friends in Australia: Tenants in Common vs Joint Tenants and the Help to Buy Scheme Sydney Alternative
- Lenny Briffa
- Apr 15
- 6 min read
Updated: Jul 23
Property prices across Sydney's CBD, the Eastern Suburbs, and the broader market are holding strong. Saving a 20% deposit alone is taking longer than ever.
That's changing how first home buyers (FHBs) approach the market. Recent data shows up to 60% of new entrants are now "co-buying" - pooling resources with friends, siblings, or extended family to buy a home together.
Pooling resources allows you to increase your borrowing capacity and significantly reduce the time it takes to save a deposit. However, treating a multi-decade credit contract with a friend like a casual rental agreement is a fast track to financial and relational stress. When you enter a joint mortgage, the structural, legal, and banking mechanics must be airtight.
Here is the professional framework for co-buying property safely, ensuring both your capital and your friendships are protected.
The Legal Structure: Tenants in Common vs. Joint Tenants
When two or more names go on a property title, you must elect how that ownership is legally structured. This is not merely an administrative checkbox on the contract of sale; it dictates asset protection and succession.
Joint Tenants: Under this structure, all parties own the property equally as a single legal entity. The critical feature here is the "right of survivorship." If one owner passes away, their share automatically transfers to the surviving owner(s), overriding any will. This is typically suited for spouses, not friends or siblings.
Tenants in Common: This is the standard, and highly recommended, structure for co-buying with mates. It allows you to own unequal shares of the property (for instance, a 60/40 split if one party contributes a larger deposit). Crucially, there is no right of survivorship. Your specific share of the property forms part of your estate and is distributed according to your will.
What Happens If a Joint Tenant Dies?
This is the single biggest practical difference between the two structures, and worth spelling out clearly.
If you own property as joint tenants and one joint tenant dies, that person's interest in the property passes automatically and entirely to the surviving owner(s) - regardless of what their will says. This is called the "right of survivorship," and it's precisely why joint tenancy suits spouses or partners, but rarely suits friends.
Under tenancy in common, there's no automatic transfer. Each owner's interest in the property is treated as their own asset, and passes according to their will (or intestacy laws if they don't have one) - just like any other asset they own.
How Banks Assess Joint Borrowers (The Risk Reality)
Here's the part most co-buyers don't expect: lenders use a rule called "Joint and Several Liability."
In plain terms - even if you own exactly 50% of the property and pay exactly 50% of the mortgage, the bank can hold you responsible for 100% of the debt. If your co-buyer loses their job or stops paying their share, the lender comes to you for the shortfall.
To mitigate this operational risk, some lenders offer specific product features and policies tailored for co-buyers. For example, one major bank allows multiple people to buy one property using completely separate loan applications and loan accounts. You essentially act as security guarantors for each other, but your actual debt facilities are kept walled off from one another.
Other banks offer a "Common Debt Reducer" policy instead.
Normally, if you want to buy another property solo later on, a bank assesses 100% of your existing joint debt against your income - even though you only owe half. A Common Debt Reducer changes this: the bank only counts your share, as long as you can show your co-borrower is reliably covering theirs.
As your broker, it is our job to navigate these varied lender policies and find the specific loan structure that is most suitable for your unique situation.
The Exit Strategy: Drafting the "Co-Ownership Agreement"
The most common point of failure in co-buying is not the purchase; it is the exit. What happens if, three years from now, your co-buyer wants to sell their share to fund a business, but you want to hold the asset?
While relying on a verbal "we'll figure it out" might feel natural with friends, having a formal agreement in place is a highly prudent step to protect both your relationship and your finances. Before signing a contract of sale, you should have a solicitor draft a formal Co-Ownership Agreement.
This document should address:
The Hold Period: What is the agreed-upon minimum timeframe for holding the property?
Right of First Refusal: If one party wants to sell, does the other have the primary right to buy them out?
Valuation Mechanics: If a buyout occurs, how is the property's market value determined fairly? (e.g., the average of two independent sworn valuations).
Dispute Resolution: If one party stops paying the mortgage or there is a disagreement over major renovations, what is the agreed-upon process to resolve it?
Drafting this agreement does not need to be a daunting or overly complex process. A standard property solicitor or conveyancer can facilitate this conversation and draft the necessary clauses as a routine part of your property settlement, giving you both complete peace of mind from day one.
Help to Buy Scheme Sydney: How the Shared Equity Model Works
If co-buying with a friend feels too complex or too risky, the Australian Government's Help to Buy scheme offers a different path into home ownership - a shared equity model where you effectively buy a home with the government instead of a mate.
How it works: rather than borrowing the full purchase price, the government contributes an equity share - up to 40% for a new home, or 30% for an existing home - in exchange for holding that same percentage interest in the property. You remain the sole person on the title, with no co-buyer relationship to manage.
Why it matters for Sydney buyers: this shared equity structure dramatically lowers both your required deposit and your ongoing mortgage repayments, since you're only borrowing against your share of the purchase price.
Price caps: the scheme applies a price cap based on location, meaning your chosen property needs to fall under the relevant cap for Sydney to qualify. Price caps are reviewed periodically, so it's worth checking the current figure for your target area before you start house-hunting.
Eligibility: the scheme is aimed at low-to-middle income earners. Eligibility depends on income thresholds and whether you already own property - *[flag for Lenny to confirm current criteria before publishing, rather than stating specifics that haven't been verified]*.
Help to Buy vs co-buying: the trade-off is straightforward. Co-buying gets you full ownership of the property (split however you and your co-buyer agree) but adds another person's finances into the mix. Help to Buy keeps you as sole owner but means sharing future capital growth with the government on their equity share until you buy them out or sell.
For a full breakdown of this and other available support, read our First Home Buyer's Guide to Available Government Support.
The Bottom Line on Co-Buying
Co-buying is a highly effective mechanism to overcome the deposit barrier and enter the market sooner. But remember, it is a business transaction first. Structuring the debt correctly and having a clear, legally sound exit strategy from day one helps ensure there are no nasty surprises down the track.
Co-Buying FAQ
Q: Will the available Government support for First Home Buyers remain available?
A: Yes, provided all applicants meet the specific eligibility criteria. However, if one of your co-buyers has previously owned property in Australia, it will void the eligibility for the First Home Owner Grant and First Home Guarantee Scheme for the entire transaction. That said, depending on the state (such as NSW), you can apply for a partial stamp duty concession or exemption on your specific percentage of the property. Read our First Home Buyer’s Guide to Available Government Support for more information.
Q: Do we need to contribute exactly the same deposit amount?
A: No. Under a Tenants in Common structure, your ownership percentage can reflect your exact initial capital contribution. That being said, your lender will assess both applicants' incomes and liabilities to ensure the total serviceability of the loan is met.
Q: Can we use different lenders for our respective shares?
A: No. Because the property acts as the single underlying security asset, both borrowers must be financed through the exact same lending institution. You can, however, structure separate loan splits within that institution.
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