LESS TRADITIONAL PURCHASE OPTIONS

Many people think that first-time home buyers are a young couple or a family starting out dating and buying a house.
But life doesn’t always work that way and you might decide, rather than waiting to be half of a couple (if that’s something you’re aiming for), that you want to enter the real estate market in a different way.
It could mean buying with friends, buying with strangers, buying something other than a traditional property or maybe even invest in ownership via the share market.
1-Buy with friends
When prices are high relative to incomes, as they have been for decades, it it may seem practically impossible to enter the real estate market as a single person nobody.
For some people, this makes them consider getting together with friends who are in a similar situation to buy a place in a group.
There are many advantages to this — you can pool your deposit to have more fairness in the matter than any of you would have on your own, you can divide the mortgage repayments once you’re there, you may have already prepared roommates who are also motivated to keep the house nice, and you can share the current costs of ownership, such as rates and maintenance.
But things aren’t always totally smooth, especially if you’re in a situation where people have contributed unequal amounts or have different contributions expectations as to how long you will own the property for.
It is really important to draw up an agreement with the help of a lawyer before starting the process.
The agreement should address things like:
* How much deposit each person puts into the purchase.
* How the loan repayments will be distributed.
* How the proceeds of the sale will be distributed. Will the winnings be distributed fairly, or will they be proportionate to everyone’s contribution?
* How you will assess the non-financial contribution to the property, such as a person performing a large part of the maintenance work. If you own a house in the framework
of a couple, you probably assume that each of you steps in and does things for the good of both of you, and it works pretty much the same over time. But if you are a builder and you find that you are solicited by your co-owner roommates to build a deck every weekend for a month, you might want a system in place to compensate you for this.

• Are you all going to live in the property? How will you deal with a situation where one person wants to move and the others don’t?
• What will you do if someone needs to sell and the others don’t want to?
• How would you react if a person lost their job or became too ill to are you working and can’t afford to pay the mortgage payments?
• What happens if someone dies?
Putting all this in writing at the beginning may seem a bit exaggerated. But it can save the drama on the track and preserve friendships if a delicate situation does get up.
2-Loans Banks may be a little more wary of lending to a group of friends than they would be to a couple because there is a perception that things can go wrong easier. But relationships are not simple either, and buying with friends are becoming much more common.
Previously, it was possible to get a lender to allow you to mortgage each share of the property independently, without obligation to pay a mortgage on the shares of the other owners. But broker Bruce Patten says the new responsible lending rules that have come as part of the CCCFA at the end of 2021, this has changed.
“If you had, say, two friends buying together and both of their names were on the title but they wanted a loan in John’s name and another loan at Wendy’s name, then each of them should give a guarantee to each other.
‘The problem that this creates is that everyone would then have to show their ability to repay the entire debt. Their debt, plus the secured party. Often it’s not working.
“We would very rarely adopt this approach. We would say okay, John, the-91 the loan suffix for $400,000 is yours, but in common names, and Wendy the -92 the account suffix for 400,000 yours is yours, but under common names.’
In this scenario, even if you have a joint mortgage, many banks will settle the loan so that you each have a portion that is paid from your own bank account and you can determine the interest rate you want and how quickly you pay it off. This is useful if you all get paid at different times, or if you have ability to make refunds.

“In this way, each of them can choose to make payments at different levels, pay lump sums, etc., and know that it relates to their loan,” Patten says. “We also suggest that they draft something with their lawyer that reflects this in in case something happens and they need to sell or have a disagreement.’
You will also need to remember that your creditworthiness may be related to the ability of your co-owners to repay the loan. While your bank can configure it in a way whether you each have your own payment to make, it is likely that you are still thinking all of you if one of you falls behind or stops paying.
Owning a house with friends can also affect your ability to buy another property in the future because the bank will count part of the house as your asset but will potentially take into account the entire mortgage as a liability.
You may also find that you are responsible for your co-owners’ other debts to the bank, like credit cards, so it is important to understand what you are accept when you sign up for the loan.
You can also only claim a maximum of 10,000 Ki in KiwiSaver First Home Subsidies, no matter how many buyers are involved in a purchase. You are also it is unlikely to remain below the combined income limits if there are a number of you buy.
People who buy with friends usually buy a house as “tenants municipalities” rather than as co-owners. Some people start a business to buy the house and then everyone owns shares in this company. (If you plan to withdrawing money from KiwiSaver to buy a house, you may need to check this out your KiwiSaver provider is satisfied with the ownership of the house in a company name.)
Others have even created trusts to hold shares in the company so that they can keep the assets separate in case there is a claim on the property in the future, for example a person having a relationship breakdown and their former partner claiming a part of the house.
The best structure for you will depend a lot on your situation so that you should get personalized legal advice.
Some banks offer products specially designed for this situation.
For example, Kiwibank recently launched Co-Own, a product that allows people to combine their savings with friends or family. This gives you the opportunity to share current expenses such as tariffs or maintenance and pool your resources to qualify for a home loan.
Most of the people I’ve talked to who have bought houses with friends I found it to be a good way to enter the real estate market, but only in the short term the solution.
Many discover that before too long they were ready to move into a house with a partner and were considering having children, which may be more difficult to do it when you live in a house full of friends (although some single mothers who live with their children seem to have a tidy life).
But buying a property should be considered as a long-term decision because you I can’t be sure that the market will be on your side when it’s time to move on.
3-Buy with the family
You can use a similar structure to buy a house with family members.
As with friends, you will need a good legal agreement because a potential falling out with family members can be even more difficult.
Anecdotally, I’ve heard that some people buy a share of their parents’ at home. It’s often something they expect to be passed on to them anyway, but owning it now means they can get more capital gains exposure and the resulting equity to fund other purchases, and they could receive a greater share of the proceeds when the property is finally sold. It can also give parents money to live on if they are at a low and fixed level income.