According to a poll conducted recently by bond originator Ooba, potential buyers are considering partnering with a friend or relative to get a bond — 38% of people surveyed opted for this opportunity. Not everyone agreed, though — 36% said they felt this would present too great a risk, while 26% said they would consider the option, but only if absolutely necessary.
First-time buyers might successfully secure a bond if they apply for a joint home loan with a friend, sibling or partner — but how safe is this, really?
According to Saul Geffen, CEO of Ooba, if your financial goals are aligned and you have a good contract drawn up, co-ownership could be low-risk. The trick is to anticipate any possible conflicts, so if issues arise later on — say, one party wants to back out — a potential resolution has already been discussed and factored into a watertight contract.
You need to have a frank, honest conversation about finances before you jump into co-ownership. Sit down and discuss where your partner stands in terms of income, monthly expenses and savings and be prepared to divulge the same, says Geffen. If your partner baulks at doing this, think twice about signing an agreement.
“The contract should cover unexpected situations, such as what happens to the property in the event of the death of one of the partners, or if one of the partners experiences financial difficulties,” cautions Geffen.
In the event of death, the property will automatically go into the deceased estate and be dealt with as part of it, in line with instructions in the will. It is therefore essential that both owners have standing estates in place.
“It is also recommended that both owners have life policies in place, which will cover their share of the home loan if a death does occur. This will ensure that the surviving partner does not have to repay the whole bond single-handedly,” says Geffen.
Another important issue to discuss is an exit strategy. Geffen says it is more than likely that a partner will consider selling the property if they perhaps marry or relocate to work in a different area.
Your contract should deal with day-to-day financial concerns, such as who will be responsible for utility bills, insurance, hidden costs like repairs and maintenance — and who will pay for furniture and appliances. These issues can cause conflict between joint owners if they’re not clear-cut.
The aim is to protect both parties’ investments, so if both are sincere about joint ownership, and are willing to commit for the long haul, it’s worth a go.
This sounds a lot like a marriage, and it is, in a way. Communication, trust, honesty — all these are important considerations, so make sure a potential co-owner is someone you’re happy to share a good part of your financial future with.
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