The first home buyer’s Guide to "Co-Buying": How to Buy Property with Mates (Without Ruining the Friendship)
- Lenny Briffa
- Apr 15
- 5 min read
With property prices across Sydney’s CBD, the Eastern Suburbs, and the broader market maintaining their strength, the traditional route of saving a 20% deposit independently is becoming a longer road. We are currently seeing a massive shift in how First Home Buyers (FHBs) are structuring their purchases, with recent data highlighting that up to 60% of new entrants are now "co-buying" with friends, siblings, or extended family.
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.
How Banks Assess Joint Borrowers (The Risk Reality)
It is essential to understand how credit teams view co-borrowers. Lenders operate on the principle of "Joint and Several Liability." This means that even if you legally own 50% of the property and pay exactly 50% of the mortgage, the bank holds you 100% responsible for the entire debt. If your co-buyer loses their job or defaults on their portion of the repayments, the lender will look to you to cover the shortfall to protect their security.
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 adopt what is known as a "Common Debt Reducer" policy. Under standard rules, if you decide to buy another property on your own in the future, a bank will assess 100% of the joint debt against your income. A Common Debt Reducer allows the bank to only assess your portion of the debt, provided you can prove your co-borrower is successfully servicing the other half.
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.
The "Help to Buy" Alternative for First home buyers
If co-buying with a friend feels too complex or risky, another option is the Federal Government's Help to Buy scheme. Rather than partnering with a mate, you effectively co-buy with the government, which contributes an equity share toward your purchase (up to 40% for a new home and 30% for an existing home). This dramatically lowers both your required deposit and your ongoing mortgage repayments, while leaving you as the sole individual on the title.
For a comprehensive breakdown of how this scheme works, along with 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: 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.
Comments