An interesting story made its way in to the office last week, and it got us thinking. Am I one of those professionals others like to live with, or should I be getting in to my own home sooner so that I don’t have to be fearful of shared houses anymore?
Can you afford to get into your first home sooner than you thought? There are a few options that you can consider that might make it easier avoid the house shares altogether, and to choose who you live with.
Consider a Guarantee – maybe a parent or a sibling who can’t loan you money but has enough equity in their own home to assist. This option is helping first time buyers get into the market sooner and cheaper.
There are different types of Guarantees and various lenders have their own policies.
This is an example of how a Guarantee could work;
You want to purchase a property for $500,000 and there is an extra $30,000 of costs for things like Stamp duty, insurances and bank fees. So you need to raise $530,000 in total to purchase that property. Let’s assume you have managed to save $20,000 which is great, but not quite enough to cover the minimum 5% deposit plus costs. This is when the Guarantor steps in. You need to borrow $510,000 which is the total required minus your $20,000 contribution. Most banks will lend up to 80% ($400,000) secured against the property you purchase. The extra $110,000 will have to be secured against the property that the Guarantor has offered as security. Even if you don’t have any savings to put towards the property, you can potentially borrow the whole $530,000 by increasing the loan that is secured against the Guarantor property.
The other option that might work for you is Tenancy in Common. This is a form of co-ownership where each tenant owns the whole of the property jointly with the other. This may be you and a friend, or a sibling. One of you can hold a larger share than the other or you can hold equal share in the property. If one of you dies, then the property forms part of your estate and passes to your beneficiaries. This is a great way to get in to the property market.
If you think you might be scary to live with or are done with sharing with other people who drink your milk, used your stuff or don’t clean like you do, then maybe its time to hit the for sale columns instead of rental pages.
There are a variety of options we can advise you on to get you off the share house merry go round and in to your own home sooner.