Frequently asked questions.
What happens if my co-owner doesn’t pay?
When you buy a property with another person, what happens if one party doesn’t meet their repayments depends on how the loan and ownership are structured and the lender’s requirements (as agreed by you!).
Before approving a loan, lenders assess each borrower individually and clearly set out each person’s legal rights and responsibilities. In many cases, co-owners are jointly liable as the bank’s interests lie in the value and subsequent lending of the property you co-own, meaning the lender may still require repayments to be met even if one party does not pay.
This information is general in nature and does not take into account your personal circumstances.
Are there options to reduce this risk? Or remove me as liable for their share?
Some lenders may consider alternative structures designed to better reflect how co-owners are contributing, such as:
- Separate loans for each co-owner (sometimes called property share or split-loan arrangements), or
- Additional security, such as a guarantor.
These arrangements are not available in all cases and depend on lender policy, legal documentation and individual circumstances.
Can a third party act as a guarantor?
In some cases, a third party — such as a family member (for example, a parent or aunt) — may be able to provide security support as a guarantor without being a co-borrower or owner of the property.
Eligibility and terms vary by lender, and guarantors are usually required to receive independent legal advice before any documents are signed.
Does having separate loans mean we are completely independent?
Not always. Even where co-owners have separate loans, lenders commonly require legal agreements or security guarantees to protect their interest (namely lending you money to purchase the property). This helps ensure everyone understands their obligations and what may happen if repayments are not made.
How do people usually approach lending with another?
Many co-owners choose to:
- Clearly document how costs and repayments are shared
- Understand the lender’s requirements before proceeding
- Seek legal and financial advice to ensure expectations are aligned
A mortgage broker can also provide general information about which lenders may consider different co-ownership or guarantor structures.
General information only. This content does not constitute financial advice and does not consider your objectives, financial situation or needs.
What is a co-ownership agreement?
A co-ownership agreement is a legal agreement prepared by a lawyer that sets out how a shared property is owned, managed and exited.
It works alongside the mortgage and property title and is separate from the bank’s loan documents.
Co-owners often:
- Discuss expectations early
- Decide how costs and responsibilities will be shared
- Have a lawyer formalise the agreement before or alongside settlement
This can make the ownership experience smoother over time.
Why have a co-ownership agreement?
When you buy with someone else, a co-ownership agreement helps clarify expectations upfront, reduces uncertainty if circumstances change, defines and provides provision for the process if situations change and defines the exit strategy of the co-ownership. It allows for expectations and processes to be clearly set-out and negotiated prior and allows transparency and clear expectations. Each co-owner has their own lawyer as indivoidual and removed representation.
What does a co-ownership agreement usually cover?
While each agreement is different, they often outline:
- Ownership percentages
- How mortgage repayments and expenses are shared
- How rental income (if any) is handled
- What happens if one party wants to sell or exit
- How disagreements are managed
- Exit strategy – what happens at the end of the contract. E.g. one co-owner buy the other out or sell the entire property
The aim is to document arrangements that might otherwise be informal.
Is a co-ownership agreement only for complex situations?
Not at all. Many people use co-ownership agreements even in straightforward arrangements, simply to:
- Avoid assumptions
- Document shared decisions
- Create certainty from the start
It’s often seen as a planning tool rather than a problem-solving one.
What happens if a co-owner wants to sell their share earlier than planned?
A co-ownership agreement usually explains how an exit may work, such as:
- Whether the other owner has the first right to buy
- How the property is valued
- What happens if an agreement can’t be reached
This provides a framework rather than leaving decisions to chance.
Does this replace the mortgage or bank documents?
No. A co-ownership agreement does not change your loan obligations to the lender.
Banks rely on the mortgage and loan contract. A co-ownership agreement helps manage the relationship between owners, not the bank’s rights.
Do co-owners need their own lawyer?
In many cases, each party is encouraged to obtain independent legal advice so everyone understands the agreement before signing.
This helps ensure the agreement is entered into freely and with clarity.
