Co-Borrowers and Joint Loans: How They Work
Many first-home buyers pool their resources with a partner, family member, or friend to buy property together. A joint loan (also called a co-borrower arrangement) has both advantages and complexities worth understanding upfront.
In a joint loan, two or more people are equally responsible for the debt. If one person can’t pay, the lender can pursue the others for the full amount. This is called joint and several liability. It’s important to understand this before signing—you’re liable for 100% of the debt, not just your share.
The main advantages of a joint loan:
Combined income: if you’re borrowing jointly, the lender considers both borrowers’ incomes. This increases your borrowing capacity. If partner A earns AUD 80,000 and partner B earns AUD 70,000, the combined income is AUD 150,000, which can support a larger loan.
Shared down payment: both borrowers can contribute to the deposit, reaching a larger down payment and a lower LVR faster.
Shared expenses: once you own the property, both owners can contribute to mortgage repayments, maintenance, and rates.
Asset ownership: the property is jointly owned, which can have estate planning benefits (the property passes to the surviving owner if one passes away).
There are some complications:
Relationship risk: if the relationship breaks down, untangling a jointly owned property can be complex and expensive. You might need to sell, refinance, or buy out the other person. Have a clear agreement upfront about what happens if the relationship ends.
Credit interdependence: both borrowers’ credit files are linked to the loan. If one person defaults, both are affected. If one person’s credit deteriorates, it affects both borrowers’ ability to refinance or take out new debt.
Serviceability: lenders assess both borrowers’ capacity to service the debt. If either has high existing debt, poor credit history, or unstable income, it can affect the loan approval.
Exit complexity: if one borrower wants to exit the loan (to buy their own property, for example), they typically need the other’s agreement and the property to refinance. This creates friction if the parties want different things.
When borrowing with family (e.g., parents helping adult children buy), the dynamics are different. Some lenders treat parents as guarantors rather than co-borrowers. A guarantor is responsible for the debt if the primary borrower defaults, but they’re not on the title to the property. This structure can work well for parents wanting to help without joint ownership.
According to 2024 first-home buyer tracking data (n=1,540), 42.3% of those who stacked FHOG with stamp duty concession were using a co-borrower arrangement, often with a partner or family member. This data suggests that joint borrowing is a common path for accessing government grants effectively.
A practical example: you and your partner are buying a AUD 600,000 home. Each has AUD 40,000 in savings (total down payment AUD 80,000). Your combined income is AUD 150,000. If you borrowed individually, each might qualify for AUD 300,000. Together, you can borrow AUD 520,000 (80% LVR), making the purchase feasible.
Important: before signing a joint loan, have a conversation (ideally with a lawyer or financial advisor) about:
- What happens if the relationship ends
- What happens if one person wants to leave the property
- Who’s responsible if one person can’t pay
- How you’ll both manage the mortgage and shared expenses
For couples, a joint loan is often the natural choice. For family members or friends, more careful structuring is needed.
Joint lending can accelerate your path to homeownership, but only if you’re clear on the risks and responsibilities upfront.