If you’re single or in the position where you might not have quite enough borrowing capacity to purchase your first home, then you might need to consider “Property Share” but what is it and how does it work? 

Q:

Can I afford to buy my first home? I am 25 years old, single and I really want to secure my future. When I search ‘first home buyer options’ on the internet, heaps of results come up and I don’t understand what my options really are. It is confusing and given that I am single, I feel like I am limited in my choices.

My family and friends have always said I have to get into property now, but I’m not sure if I can really afford this in my situation.  My sister Concetta mentioned “Property Share” to me the other day, but she has a few more debts than me and I am not sure if her debts will lessen my chances of my loan being approved. 

A:

With respect to Property Share this is basically how it works...   

Let’s say you want to buy a house with your sister.   

In the past when a lender looked at the borrowing capacity, they looked at your overall financial position. In this case, you might have $30 000 saved as does your sister, but your sister has other debt (and you don’t).

In the past the lender combines the two of you as far as income and loans and says you can borrow $x. In this scenario, your sister Concetta may be holding you back (let’s assume together you can borrow $ 320 000).

In the past we have split the loans so you can pay off yours faster if you like...BUT here is the KEY – Lenders look at the overall position – Combined!

 

Non-Property Share

 

You

Your Sister (Concetta)

Savings

$30,000

$30,000

Credit Cards

No Credit Cards

$10,000 (across 3 cards)

Car Loans

No Car Loans

$40,000

Your combined loan capacity

$320,000

 

With Property Share Lenders DON’T look at the overall position

You might be able to borrow $220,000 on your own (still not enough to buy a property on your own) and you sister $150,000.   

You buy a property together – split the loans $220k you, $150k Concetta – when lender assesses its individual basis so in this case you can borrow $370 000     

It’s a way that single people or families with one income can combine with a friend or family member and get into a property sooner.

Property Share based on the above situation

 

You

Your Sister (Concetta)

Borrowing Capacity

$220,000

$150,000

Your combined loan capacity

$370,000

   

Need help getting into your first home or investment?

PEB Property Group can help you get the edge and become a smart property owner with a free consultation.

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PEB Property Group is a complete financial planning advisory service for Perth families. Offices are located in Inglewood and Willetton, Perth, Western Australia and offer - Financial Planning · Finance Broking · Property Management · Real Estate Sales · Property Investment · Development.

Disclaimer: Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. Information in this edition is correct as of the date of publication and is subject to change.