The tightening housing market in both Melbourne and Sydney, with home pricing rising at a rate faster than wages (in many cases), has people thinking up some impressive innovations. Recently featured in several news publications was one of these innovations, the story of two couples who have gone halvies in a house. One couple is unmarried, another is married with a young baby. They chose a $1.1 million residence in Manly, and have split it into two homes – one for the upstairs area and one for the downstairs. Each area has its own entrance, bathroom and kitchen. It worked particularly because each couple was looking for similar things in their purchase … but should you do the same thing? We check out some of the issues surrounding halving a house today.
The Home Loan
You’ll need to do some serious exploration of options if you’re considering taking out a home loan with four people as the mortgagees. Banks are wary of anything outside the norms – they realise as much as you do that there is greater potential for something to go wrong with double the ordinary number of mortgagees in the mix.
However, mortgage broking services will be invaluable in this circumstance, as you skip the more extensive liaising with the banks, and are just presented with options for your loan.
If you want greater flexibility in your choice of lender, there is always the option of having one couple purchase the home, and the other rent out half of the house.
The Property
You’ll need to do some homework with the local council to see if the property can be subdivided, if you want to go down that road.
In general, in Victoria there must be at least 300 square metres of land per dwelling, and there are other restrictions with regard to zoning, the building envelope of the land and the council’s neighbourhood character plan.
The Formalities
You’ll need to engage a solicitor specialising in property matters (who may also act as your conveyancer) to draw up an agreement stating:
- How the property will be paid for
- How the council rates and water bills will be split
- How the living areas will be split (for example, who has the right to any garages, sheds or bungalows on the property? What if the house is asymmetrical?)
- How the profit will be split when it comes time to sell
- What happens if one of the couples splits up (if you want to take out a four-way mortgage with two couples).
You’ll obviously need this document even if you have the money to purchase your property outright, without the help of a home loan.
The Relationships!
It takes a special sort of friendship to share a house permanently! Even if you only want to rent out rooms to students or boarders, it takes a special sort of temperament to constantly have people you don’t know coming and going in your own home.
To some extent, your legal agreement will protect relationships. Make sure everyone understands it fully from the beginning – clear expectations will help preserve relationships.
However, it will also be important to maintain distance. The saying ‘familiarity breeds contempt’ didn’t spring out of thin air! Know the risks you are taking in your friendship, and be prepared … then ensure that you all remain very grounded, very positive and very much focused on solutions to any problems rather than blame.
Going halvies in a house is an interesting, if not widely applicable solution to the housing shortage! Our Melbourne mortgage brokers are happy to help you make it work.