Buying property with partners
Are you aware that if you are purchasing property with someone else there are two ways in which the property title can be held? Joint Tenancy and Tenants in Common.
The difference between the two ownership scenarios is important to understand as there are factors which determine who is responsible for the debt in the case of one party passing away.
When considering borrowing with someone else, especially with an investment property, you should consider seeking financial and legal advice first. Your decision may have implications for estate planning, taxation as well as property ownership.
In relation to the ownership of property, there is the following:
- Registered proprietors of the property – the name of the people on the property title, and
- The Mortgagor – the person on the title who has agreed to have a mortgage listed over the title, and
- The Mortgagee – the entity who has lent the money under the mortgage loan
In general, there are two ways you can hold the property title – Joint tenancy and Tenants in common.
What is joint tenancy?
'Joint tenancy title’ involves two or more persons holding ownership of the property at the same time. This is the way in which a couple usually purchase property together. The key point about a joint tenancy is when one party passes away, ownership of the property passes to the survivor. Similarly, where a loan is secured by the property under a mortgage, responsibility for the debt passes to the survivor. In a divorce, if there is a mortgage, joint tenancy means both parties are still responsible for the debt until such time as the family law matter is settled or the property is sold.
What are tenants in common?
‘Tenants in common’ title is most common in either an investment scenario, where each party owns a set proportion of the property. The proportion may be equal or divided according to how the property was purchased. For example, two people may own 50% each, or four people may own 25% each, or one person may own 30% and the other two parties 35% each. It really depends on how the purchasers wish to apportion ownership.
However, regardless of the proportions of property held, where the property title is taken as security for lending, all persons on the property title are equally responsible for the debt. This means that even if your investment partner who owns 70% of the title is defaulting on the loan, you remain equally responsible for paying off the debt.
Tenants in common allows people to jointly invest in property, but in the case of death, the property doesn’t automatically pass to the other parties. As to ‘who gets it’? This is specified in your Will.
Which is right for me?
When making a decision on whether to select joint tenancy or tenants in common, always remember to discuss your concerns with your legal and financial advisors.
What’s the next step?
For all loan enquiries chat with a member of our lending team by arranging an appointment on 02 6763 5111 or visit one of our two Tamworth branches in Peel Street and Tamworth Shoppingworld, Gunnedah or Narrabri branches.
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