The changes to the government's Home Guarantee Scheme and what they mean for you

Many people will tell you that Family + Money Matters = Conflict. But, with property prices still sky high and new definitions regarding who you can buy your first property with, it’s worth asking: Should you join forces to get onto the ladder?

If you’re considering buying a property with a sibling (or friend) there are some key things you want to cover before you sign on the dotted line.

What’s changed under the home buyer schemes?

From July 1, 2023, there were changes made to help more Aussies buy a home under the government’s First Home Guarantee and Regional Home Buyer Guarantee.

This included a definition change from married or de facto partners and singles to include “friends, siblings and other family members”. It has also been expanded for those people who haven’t owned a property in Australia for the past 10 years.

There are some income caps and minimum deposits required (5 per cent for both schemes), but the schemes enable you to purchase before you have a 20 per cent deposit without incurring Lender’s Mortgage Insurance.

There are 35,000 places up for grabs under the First Home Guarantee, 10,000 places a year for the Regional First Home Buyer Guarantee and 5,000 places a year for the Family Home Guarantee until June 2025.

Why might you consider buying with family or friends?

There are some simple and obvious benefits. Buying with someone means you won’t need to cough up the entire deposit amount, both of your incomes will be considered when looking at mortgage serviceability, and your bills (for example, mortgage repayments, strata and rates) will be shared.

This can mean you could buy sooner, and/or that your ongoing costs could be lower. You could get out of the rental rat race and have a place of your own (albeit shared with someone else).

However, buying a property with someone else is a big deal. You want to make sure this isn’t a decision that you rush into without thought or thorough consideration. Making sure you are on the same page before you buy together is key.

Here are some key things to discuss first: 

1. What type of property and locations are they interested in? Does that align with your intentions?
2. What are the “must haves” for each of you? Write a list including “must-haves” (that is, you absolutely would not look at a property if it didn’t have these key things), “nice-to-haves” and a “dream wish-list”. If it’s your first property, be prepared to not get your dream wish-list items.
3. How long do you intend to live in it? Are you both wanting to live there for a short or long amount of time? Would the idea be to keep it only for a certain amount of time, build equity and then sell? Or would you want to hold it indefinitely as an investment property?
4. If one of you wants out but the other doesn’t, how will you manage that? Does the person wanting to stay get the first right to buy? How will you decide what it’s worth at that time?
5. Are you both likely to be able to coexist together? Catching up for a weekly brunch is very different to living together full-time. What are your schedules, habits and quirks that you need to make each other aware of before you have a meltdown over fridge magnets? (My old flatmate and best friend used to move my fridge magnets to the side of the fridge and I would passive aggressively move them back again, for four years!)
6. What happens if one of you gets a partner? Discuss this upfront so you are both clear on expectations and boundaries you want to have in the place (ideally before they meet the love of their life and you suddenly feel like a third wheel in your own home).

Some of the technical elements to consider

There is a big difference between joint tenants and tenants in common, namely around survivorship, should something happen to one of you.

Joint tenancy comes with the “right of survivorship”, meaning when one of the joint tenants dies, the other “absorbs” their share. This is common when people own a property with their spouse.

With Tenants in Common there is no survivorship rule, meaning upon the death of one of the owners their share goes to whoever is named in their will. It’s very important you review these differences and get expert legal advice where needed.

You should also discuss with a trusted mortgage broker what this means for any future debt you take on. Will the banks want to still review the other party’s financials at that point? Can the debt be structured in a way that will futureproof this?

Are you both adequately insured? If one of you stopped working or, worse, wasn’t around anymore, what would happen? How would you manage ongoing costs? Would the bank call in the debt? What changes are needed to your will (assuming you have one)?

For each of these, make sure you have engaged the right experts upfront to avoid nasty surprises or heartache. It might cost more in the beginning, but having the correct contracts, agreements, legal and insurance advice could be worth far more in the long run.

Ultimately, the changes are exciting advancements to help first-home buyers join forces to get on the ladder. Good, honest communication from the outset and legally binding agreements will help if any issues pop up down the track.

You want to be able to maintain your close relationship even after you stop living together – or even if one of you has a mild obsession with travel memento fridge magnets.

Jessica Brady is a licensed financial adviser and runs affordable online money programs for people who want to learn how to be financially free.