FINANCIAL ESSENTIALS
The Basics
- When you are co buying you are sharing the mortgage so it becomes affordable. You will ideally have the deposit and will be looking to get the best mortgage. Ideally all co-owners will have an equal share. This can be set out in the co-ownership agreement. As co-buyers you will be taking a joint mortgage of the property.
- How much you intend spending together on your purchase is the most important decision you will make. It determines whether you can buy at all. So it is essential to conatact a mortgage broker today and discover exactly how much you can borrow.
- We can put you in touch with a financial consultant who will advise you and your co-buyers on your collective borrowing power and find the best home loan for you. Click here to contact a financial agent.
Deposit
- It is important to decide on how much you can contribute towards the deposit. Generally a deposit of 10% is required at the time of signing the contract. If you have no deposit, it does not mean that you cannot buy. It just means that you need to think about it more seriously and getting 100% finance is very expensive.
Budget
- Before you go looking for property it is important that you and your co buyer determine what your budget is. The amount your co-buyers can contribute towards the deposit has a direct impact on how much you can borrow. You should talk to your broker and get pre approval before you go looking for property.
Finding a property
- Once you have found a property you must immediately inform your broker so that he can formalize the process, order a valuation of the property and confirm that you and your co buyers are able to get the loan you are looking for.
Insurance
Whenever you buy an asset that has a significant monetary value you are advised to insure it. When you are co-buying it is important that you have adequate insurance cover which may save arguments in the event of an accident.
- Income protection- it is important that each individual takes out insurance to cover the monthly mortgage repayments in the event that they lose their job or are unable to work due to sickness. This insurance must cover the monthly mortgage repayments until they find employment or twelve months have elapsed. If they find employment all is well but in the event that they do not find employment, then they would seek to either rent or sell their share of the property.
- Life and Critical Illness policy - In the event that a party was to die or suffer a critical illness a claim can be made against the individual’s Life and Critical Illness policy. This insurance will pay a lump sum equivalent to the individual’s outstanding mortgage debt. Should they have died their share in the property will then be owned by their estate. The surviving owners will therefore not have to support the deceased person’s share of the mortgage and will deal with their estate in the same way as they would have done with the deceased member.
- Building insurance – covers the cost of rebuilding your property if something was to happen. This should be in place as soon as you sign the contract and is a mandatory requirement of your mortgage lender.
- Contents insurance – covers the cost of replacing your possessions should something happen.
It is a necessity that each party have the necessary insurance protection due to the importance of protecting all parties to the joint mortgage. These are not compulsory since eventually you will decide what goes into the agreement but they are important matters to consider when drafting the agreement. Contact us for more info. |
