How co-buying can create future lending limitations


A trend that has become more prevalent over recent years has been co-buying.

What I mean is buying a property with a friend or family member to either live in together or as an investment.

Now, there are a couple of reasons for this, including people generally settling down with a partner later but wanting to get on the property ladder sooner.

Another, of course, is affordability with the power of two incomes making it easier to secure a loan for a potentially better property, too.

There is plenty of guidance around on what needs to be done before buying with someone who isn’t your partner, because while you might be long-term friends or family members, life does tend to change everyone’s goals eventually.


Lending limits

One aspect of co-buying that not many people are discussing, though, is what happens when you want to buy another property independently in the future?

Sure, you might own half a property with your best friend Julie or your brother Josh, but how does that situation impact your borrowing capacity?

Let’s say it’s an investment property that you own with someone else.

Everything has gone quite well for a few years with the rent being split evenly between you as per the terms of the tenants in co-buying common ownership structure.

You use this rent to repay “your share” of the mortgage.


Both parties are quite happy with the arrangement and have no plans to sell up anytime soon.


Over the past few years, you’ve even managed to save some money, too, which you’d like to put towards buying another property by yourself.


So, you head along to your mortgage broker to get the good news about your borrowing capacity.

And that is potentially when the truth of the matter becomes crystal clear.

You see, your broker, let’s call him Jeff, has some info for you that quickly turns your frown upside down.


Jeff tells you that, according to lenders, you are responsible for the entire loan of the property that you bought with Julie or Josh.

Technically it’s called being jointly and severally responsible for the entire loan, he says.

That’s because if your co-owner defaults on their mortgage repayments, the lender will seek to recover the full repayment amount from you.


So, within a few minutes, you’ve learned that you thought you had borrowings of only $300,000 – being half of the loan of the property – but, in fact, lenders will take into account the entire loan amount of $600,000.

On top of that, the bad news continues, lenders will only assign half of the rent to you, which clearly leaves a theoretical big cash flow hole in your finances.


What can be done?

Jeff apologises and says that you’re only likely to be approved for a loan of $200,000, which dashes your dream of buying that post-war renovator on the fringe of a capital city.


You can’t even afford to buy a second-hand unit it seems.


Amongst the myriad bits and pieces that you considered before co-buying, what happened next clearly was not one of them.


One way to remedy the situation would be sell your share of the property to Julie or Josh – if they wanted to buy it.

And another would be to offer buy their share – if they wanted to sell it.

That way you would either have no borrowings and a lump of capital growth cash to your name or you would at least have the full rent included as income in your serviceability calculation, which would hopefully change the goal posts somewhat.


So, as you can see, co-buying comes with a number of pluses and minuses.

The best strategy is always to seek professional advice before journeying down a path that may have a destination that you’d never even considered.


High-Performance Property Investment in
5 Simple Steps

In this free guide, you will learn how to Implement the same strategies that led me to build a $3.5 million dollar portfolio in less than six years. – Daniel Walsh

Related Post


Respecting your Privacy

Your Property Your Wealth Pty Ltd (YPYW) is committed to supporting the Australian Privacy Principles for all fair handling of Personal Information which set clear standards for the collection, use, disclosure, storage of and access to Personal Information collected during the course of business operations and compliance with the Privacy Act 1988 (Commonwealth) and its amendments (the Act), and the Australian Privacy Principles (APPs) set out in that Act. You can see the full text of the APPs online at the Office of the Australian Information Commissioner’s website at:

Personal Information means your name, mailing or residential address, telephone number, email address and other transaction and registration details including the company you work for and your role and financial information, including credit card information and information collected from credit reporting agencies.

Our respect for your rights to the privacy of your personal information is paramount.  We have policies and procedures in place to ensure that all personal information, no matter how or where it is obtained, is handled sensitively, securely and in accordance with the APPs.

This Privacy Policy sets out:

  • What sort of personal information is collected and stored;
  • How information is collected and used;
  • What happens if you choose not to provide the required information; and
  • How you can request access to the personal information we hold about you.

From time to time it may be necessary for YPYW to review and revise this Privacy Policy. We reserve the right to change our policy at any time. Amendments or replacements of the Privacy Policy will be posted on our website.

Collection of Your Personal Information

We only collect personal information relevant to our business relationship with you so that we can provide our services and products. We may collect your personal information:

  • directly from you including via telephone, email or facsimile;
  • when your register on our website;
  • when you place an order or service request with us;
  • where you access and interact with our website;
  • from other sources including a third party such as credit reporting; and
  • any correspondence we receive from you.

Is your personal information secure

Where you submit personal information, we manage it by using up-to-date techniques and processes that meet current industry standards to ensure that your personal information is kept secure and confidential. We also take measures to destroy or permanently de-identify personal information if it is no longer required.

Use and Disclosure of Personal Information

You acknowledge and consent that by providing your personal information to us that we may use and disclose your personal information for the purpose for which it was collected or for a related or ancillary purpose such as:

  • supply of our services and products to you in accordance with our Terms and Conditions and any agreement entered into with you, to facilitate, process, carry out and respond to your request;
  • to our third party service providers to assist us in providing and improving our services and products to you and developing, improving and marketing our services and products to you;
  • for regulatory reporting and compliance with our legal obligations, to various regulatory bodies and law enforcement officials and agencies to protect against fraud and for related security purposes;
  • to the seller or supplier of any products to you for the purpose of ascertaining and obtaining any information required to perform our services for you;
  • to identify you and conduct appropriate checks, including credit checks;
  • set up, administer and manage our services and products and systems, including the management and administration of an account;
  • to train and develop our staff to better provide services to you;
  • to contact you; and
  • to our successors and/or assigns

What happens if you do not want to disclose personal information?

You have no obligation to provide any personal information requested by us, but if you choose to withhold personal information, we may not be able to provide you with the products and services that depend on the collection of that information.

Removing your personal information

You may contact us at any time in writing and request that we remove and delete your stored personal information.

Providing Personal Information About Another Person

You represent to us that where you provide personal information to us about another person, you are authorised to provide that information to us, and that you will inform that person who we are, how we use and disclose their information, and that they can gain access to that information.

Linked Sites

YPYW’s website may contain links to websites which are owned or operated by other parties. You should make enquiries as to the privacy policies of these parties. We are not responsible for information, or the privacy practices of such websites.

How can you access your personal information?

You may in writing request access to personal information that we hold about you. We will provide you with access to personal information in accordance with the Act and APPs and we may not grant you access to the personal information that we hold where the APPs allow us to do so. If you are refused access to information, we will provide you with reasons for the refusal in writing.

How to contact us

If you have any questions in relation to privacy, please contact us on 0490 912 045 or email Daniel Walsh – For more information about privacy law please visit

High-Performance Property Investment in 5 Simple Steps

In this free guide, you will learn how to Implement the same strategies that led me to build a $3.5 million dollar portfolio in less than six years. – Daniel Walsh