Entering, or re-entering the property market, can be tough especially if you are relying on one income. Saving for a 20% deposit plus buying costs and struggling with rising property prices is no small feat and a concern for many.

These days it is hard enough to get into the property market with two incomes and no children – let alone on your own.
But while home ownership can be challenging for many first home buyers and single parents, it is not impossible. You may be eligible for government schemes to make home ownership a little easier. But if you still aren’t quite there perhaps co-ownership could be a solution.

Bring forward property ownership

Saving sufficient funds to enter the property market can take time, however by pooling funds with family or friends you could bring forward your entry into the property market. But co-ownership is not something that you should enter lightly. It is important to consider the legalities that come with each type of ownership and the ‘what ifs’ such as:

• there is a change in circumstances for one party
• an inability of one party to meet their portion of repayments and costs
• one party wants to sell in the future and the other does not

These are important considerations but ones you can overcome with open, honest communication and an upfront agreement in place. Therefore, it’s important to not only consider who to co-own the property with, but also how.

Two types of co-ownership

When you buy a property with another person, you can choose from two types of ownership – ‘joint tenants’ and ‘tenants in common’.

1. Joint tenants
When purchasing as joint tenants you must own an equal share in the property (50:50) and you must sell the property together. If one party passes away, their interest in the property automatically passes to the other party.

2. Tenants in common
This option offers a slight flexibility to the above as tenants in common can own a disproportionate share in the property (say 60:40) and can sell (with restrictions) their share of the property when they like. For example, they cannot advertise their share of the property on a public real estate forum. The property needs to be sold to an individual who is happy with the co-ownership arrangement. Both the potential buyer and existing owner need to exert sufficient trust for this new arrangement to work.

If one party passes away, what happens to their interest in the property is determined by their estate (eg will).

Under either co-buying option, each party is responsible for the whole debt should the other party be unable to pay.

Accordingly, if you need to borrow more money in the future, the lender will take into account 100% of the joint debt, not just your share, when assessing the application.

Co-ownership agreement

We recommend you seek legal advice and structure a well-designed co-ownership agreement or contract and set out the rights and responsibilities of each co-owner. This agreement should address all the likely circumstances that may arise including if one party wishes to sell or is unable to pay.

Applying for a co-ownership mortgage

Co-ownership is largely the same as applying for a mortgage with your partner or someone who you have shared finances with. The main difference is that usually the loan is separated into two separate accounts to allow each party to potentially manage their own financial position.

Once a joint mortgage has been approved, all co-owners will be on the title deeds and mortgage, proving joint legal responsibility for the property.