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One Borrower, Two Owners

What happens if you own a property jointly with someone else, but only one of you wants to get a loan on that property? It’s more common than you think and most banks just aren’t set up to handle it.

What do the banks think?

  • One person can borrow on a jointly owned property.
  • All parties must consent to the loan.
  • All parties are joint and severally liable for the loan.
  • Every loan is considered based on its individual circumstances.
  • Many banks will not accept this home loan structure.

Do you need help getting your home loan approved? Call us on 1300 889 743 or fill in our free assessment form and our specialist mortgage brokers will help you.

One group of people, many different directions

Usually this situation arises because people own a property together, but have different goals or different risk appetites which causes them to seek a loan in just one name.

Some common examples we see:

  • Friends buy investment properties together, but later one wants to keep investing but the other doesn’t.
  • Groups of 5 – 10 people buying a small apartment block together as an investment.
  • Brothers and sisters who have inherited a property, but then want to do different things with it.
  • A guarantor loan arrangement where one person borrows against a jointly owned property to buy another property for themselves.

It is possible for all of these groups to allow one member of their group to borrow against their property, however everyone needs to consent and be aware of their obligations.

Not all banks will assist with this type of loan, the key to success is to apply with the right bank.

The property share solution

One solution is to use a loan known as a ‘property share loan’. This has some unique features:

  • Each borrower can have their own loan account that only they can access.
  • Each loan account can be in different names.
  • The loan is secured on the property that is jointly owned.
  • Everyone is joint and severally liable for each other’s loans.

Example: Suppose a brother and sister buy a house together for $1,000,000. The sister has a deposit of $200,000.

The brother has no deposit but a higher income.

They may own the property 50% each yet the sister has a loan of $300,000 and the brother has a loan of $500,000, both secured on the property.

Do you need help with your home loan? Our mortgage brokers are experts in helping people with unusual ownership structures.

Call us on 1300 889 743 or fill in our free assessment form and we’ll get back to you with some options.

Yes, everyone needs to consent

Let’s imagine you own a property together with four other people

Three of you want to borrow against that property, but the last person doesn’t.

In this case, you’ll need the last friend’s consent to apply for the loan.

This just makes sense, what if you were to experience financial hardship and had to sell the property? It’s not fair on your friend if they have to sell their property because of a loan they never consented to and possibly didn’t know even existed.

Joint and severally liable means you’re all liable

If you’re on the title of a property but you are not a borrower on the loan then the bank can’t expect you to make repayments right?

Wrong.

When the loan is set up you’ll be a mortgagor and a guarantor for the debt. That means that the bank can call on you to make repayments if the borrower fails to do so.

What about if you all have your own loan accounts? As long as you pay your loan account then surely you are ok?

Again, wrong.

If one person doesn’t make their repayments, the entire loan is in arrears.

The loan is in default of the contract so the bank has the right to demand repayment of the loan and to begin taking recovery action. The banks can make a claim on you for the other person’s missed payments!

It’s important that you choose who you borrow with very carefully!

Don’t be a guarantor for someone else’s loan unless you know the potential consequences and believe they’ll meet their obligations.

Seek legal advice before entering into any joint and severally liable loan.

Do you need help with your mortgage?

Our mortgage brokers are experts in helping people with unusual ownership structures.

Call us on 1300 889 743 or fill in our free assessment form and we’ll get back to you with some options.

  • TylerD

    If there are 3 parties, each with their own loan accounts, will it be okay as long as 2/3 of them are making the repayments regularly and on time every time even if the 3rd one is missing payments?

  • Hey TylerD,

    Unfortunately, if even one of the parties doesn’t make their repayments, the entire loan is in arrears. The loan is in default of the contract so the bank has the right to demand repayment of the loan and t begin taking recovery action. Even if 2/3 of the parties have been making regular mortgage repayments, the bank can make a claim on you for the 3rd person’s missed payments.