Don’t have the full 20% deposit, here’s another option to help you get your foot in the door.
These days buying your first home is becoming so difficult particularly saving up the 20% deposit needed. There are other options for you to get into the property market without the 20% deposit and we have previously discussed Lenders Mortgage Insurance so now I will tell you about Property Share. Let’s say you found your dream home for $400k then you are looking at a deposit of $80k, that’s not much right? Wrong, for many of us that’s more than their annual salary and if you’re renting now how do you manage to pay rent and save?
That’s where Property Share is an excellent option. Property Share is where you purchase a property with a close friend or family member* however the loans are split in to two separate loans. This means you need $200k to make the purchase and the other party needs their $200k.
Since you, personally are only borrowing $200k then you only need a deposit of $40k (ideally) or as little as $16k if you want to pay Lenders Mortgage Insurance. The other party gets their loan for the purchase and they too can contribute their own deposit amount.
Because each loan is separate and in individual names you can set the repayments up to suit you, you can repay more or make minimum repayments, you can choose a fixed rate and so on. The best feature is how you choose to set up your loan won’t affect the other party, as long as all obligations are met.
What if the other person doesn’t pay the loan? The lender gives you the option to buy them out or if you are not able to do that the lender will sell the property however your loan is repaid first and in full. This means you have no default recorded on your name and your credit rating is left intact.
· Less deposit needed
· Separate borrowings that don’t affect each other
· Get you into the property market sooner
· Borrowing capacity increased
· Split Government costs
· For investment properties or Owner occupied
· Need to really trust the person you are property sharing with
· Need to find a property you both like
· Need to have a long term plan established at the start
As you can see Property share is a great option however you need to have a really good discussion about if it is suited to your circumstances.