Preparing financially
Buying with family — guarantors and co-ownership
Two different structures — a guarantor putting up security, or co-owning with family or friends — with very different risks and obligations.
- A guarantor's own property is genuinely at risk if the borrower can't repay — not a formality.
- Guarantor arrangements should always involve independent legal advice for the guarantor.
- Co-owners named on a loan are each responsible for the whole debt, not just their agreed share.
- A written co-ownership agreement, covering an exit or dispute, is strongly advisable before settlement.
Guarantors
A guarantor (often a parent) uses their own property as additional security, which can let a buyer borrow with a smaller deposit or avoid LMI (see the deposit guide). This is a real financial and legal risk to the guarantor, not just a formality — if the borrower can't repay, the guarantor's own property is at risk. Guarantor arrangements are usually limited in time or amount, and should always involve independent legal advice for the guarantor.
Co-ownership
Buying together with family or friends (not a partner) — siblings, or a parent and adult child, for example — is a different structure again: everyone named on the loan is jointly responsible for the whole debt, not just their agreed share. A written co-ownership agreement covering what happens if one party wants to sell, can't pay their share, or the relationship changes is strongly advisable before settlement, not after a disagreement arises.
Practical checklist
Before a family guarantee or co-ownership arrangement
- Get independent legal advice for the guarantor, separate from the borrower's advice
- Confirm the guarantee's time or dollar limit with the lender
- Draft a written co-ownership agreement before settlement, not after a disagreement
- Discuss what happens if one co-owner wants to sell or can't pay their share
Questions for a professional
- What exactly is the guarantor liable for, and for how long?
- How is the guarantee released once the borrower has enough equity?
- What should a co-ownership agreement cover for our specific arrangement?