More Australians are teaming up with friends and siblings to buy a home, because splitting a deposit and a repayment is one of the few levers left when prices and rates both bite. Buying property with friends can make a purchase possible. It can also tie two people’s finances together in ways that only show up when something goes wrong.
This is a structural story, not a lifestyle one. The pitch is simple: two or three incomes, one deposit pool, one set of repayments shared. The catch sits in the loan contract, the tax treatment and what happens when one person wants out.
Why shared buying is gaining ground
Affordability is the driver. With repayments squeezed, a single income often cannot clear a lender’s test for the kind of property a buyer wants. Adding a second borrower adds income, and often a bigger deposit, which lifts the price range on the table.
That logic is not new, but it is spreading beyond couples. Friends and siblings are doing the same sums, and some are going further by pooling land and money, as in this Melbourne co-housing redevelopment.
How lenders assess a shared loan
A lender does not see a friendship. It sees two or more applicants and tests them on combined income against combined debts.
In plain English, the key points are:
- Each borrower’s income, existing debts and living expenses are assessed.
- Each person’s own commitments, such as a car loan, HECS debt or credit card limits, reduce the shared borrowing capacity.
- Lenders apply a buffer above the actual interest rate, so the repayment is tested at a higher rate than the one you will pay.
- Policies on non-family co-borrowers vary by lender. Some are more cautious about friends than about relatives, so it pays to ask early.
The practical result is that one partner’s heavy debt can drag down the whole application. It is worth comparing lender policies before you fall in love with a property. For how those buffers pinch households, see our look at serviceability pressure in Sydney and Melbourne.
The catch
- Joint and several liability means each borrower can be chased for the full debt, not just their share.
- If one person stops paying, the lender can look to the others.
- A co-borrower’s missed repayments can show up on your credit file too.
Joint liability is the biggest risk
Most people think of a shared loan as “I owe half”. Legally, that is often not how it works. On a standard joint loan, every borrower is typically liable for the whole amount.
That matters in a downturn. If a friend loses their job or a sibling’s circumstances change, the remaining borrowers may need to cover the shortfall to protect their own credit. A cashflow buffer and a written plan for missed payments are not optional extras here. They are the safety net.
This ties into the wider arrears picture. Our mortgage stress and arrears guide explains how stress builds and what lenders do when repayments slip.
Tax and ownership structure
How you hold the property shapes the tax outcome, and it is hard to change later.
There are two main ways to own jointly:
- Joint tenants: equal shares, and the surviving owner takes the whole property if one dies.
- Tenants in common: shares can be unequal, such as 70/30, and each share can be left in a will.
For friends and siblings, tenants in common is often the more sensible fit, because it can reflect who put in more money and lets each person plan their own estate. Capital gains tax generally applies per owner to their share when a property is sold, and the main residence exemption has conditions. If the property is later rented out or one owner moves out, the treatment can change.
Those rules are detailed and depend on individual circumstances, so a tax adviser should look at your specific setup before you sign.
Exit mechanics: plan the breakup first
The unglamorous part is how to leave. Life moves on. Someone partners up, relocates or needs cash.
A co-ownership agreement drawn up by a solicitor can set out:
- How a buyout price is calculated, for example by independent valuation.
- How long the others have to refinance and pay the departing owner out.
- What happens if someone cannot or will not keep paying.
- Who decides on major spending and when to sell.
Without an agreement, a dispute can end with a forced sale, which rarely favours anyone. The cost of a good agreement is small beside the cost of a messy exit.
Does this help or just spread the risk?
Co-buying can genuinely widen options. It can also concentrate risk into a single asset owned by several people with different lives and goals. Both things are true.
It works best when the owners have similar incomes and timelines, keep a shared cash buffer, and treat the arrangement as a financial contract rather than a favour. It works worst when one person carries most of the load informally, because that imbalance tends to surface at the worst moment.
And buying together does not change the underlying market. If prices soften, shared owners still face the same equity pressure as anyone else, a theme we cover in buyer paralysis in a property downturn.
Before you sign anything
Start with three questions. Can each of us carry the full repayment alone for a few months? Is the ownership structure written down? Is there a written exit plan that everyone has actually read?
If the answer to any of those is no, pause. Book time with a broker who knows each lender’s co-borrower policy, a solicitor for the agreement, and an accountant for the tax side.
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General info, not financial advice.
