Buying a house with friends: how co-buying a first home works

Buying a house with friends means two or more people apply for the loan together, share the deposit, and go on the property title as co-owners. It can bring a first home within reach sooner, because you pool deposits and incomes rather than saving and borrowing alone. It also ties everyone to the same debt and the same property, so the agreement you reach before you sign matters as much as the loan itself. This guide explains how co-buying a first home works in Australia, the deposit and lenders mortgage insurance rules that apply, the ownership structures to choose between, and the practical points worth sorting out with the people you buy with. The figures here are general, and the outcome for any group depends on your circumstances and each lender’s criteria.

Is buying a house with friends a good idea

There is no single answer, because it depends on your finances, your relationships, and how clearly you plan ahead. The appeal is straightforward. Pooling deposits can get you to a 20% deposit faster, and combining incomes can support a larger loan than one person could manage alone. The trade-off is shared risk. When you buy together, a lender treats you as one borrowing unit and assesses your combined incomes, expenses, and existing debts.

Buying property with family members or friends works best when everyone is clear on who pays what, what happens if someone’s circumstances change, and how the group would handle a sale. Those are legal and personal questions rather than lending ones, and they are easier to settle before you buy than after.

How co-buying a first home works

When you buy a house with a group of friends, you make a joint application. The lender looks at all applicants together: combined income, combined living expenses, any existing debts like car loans or credit cards, and everyone’s credit history. More incomes can mean a larger loan, but more expenses and debts are counted too, so the result depends on the full picture across the group.

You also need to decide how to hold the property title. There are two common ways, and the choice has real consequences for what happens to each person’s share over time.

For friends and family buying together, tenants in common is often the more flexible structure, because it lets each person own a defined share and leave it to whoever they choose. A solicitor or conveyancer can explain which structure suits your group.

Deposit and borrowing power when you buy together

The more of the purchase price you cover with your own deposit, the less you borrow and the lower your ongoing costs may be. A common goal is a 20% deposit, because borrowing 80% or less of the property value helps you avoid lenders mortgage insurance.

You do not always need 20%. If your loan-to-value ratio, the amount you borrow as a percentage of the property value, is above 80%, you may need to pay lenders mortgage insurance. A government scheme also lets eligible first home buyers purchase a home with a deposit as small as 5%, without paying lenders mortgage insurance. Whether anyone in your group qualifies depends on the scheme’s eligibility rules and on lender criteria, so check before you rely on it.

To get a feel for what your combined incomes could support, try the how much can you borrow calculator before you start looking. It gives an estimate only, and your actual borrowing power depends on your circumstances and each lender’s criteria.

Lenders mortgage insurance when the deposit is under 20%

Lenders mortgage insurance, or LMI, often surprises first home buyers, so it is worth understanding early. LMI protects a credit provider if borrowers are unable to repay their loan. It is usually a one-off cost to the borrower, payable when the amount borrowed exceeds 80% of the value of the property. It does not benefit the borrower. It only protects the lender, even though the borrower pays for it.

That 80% threshold is the same as saying the deposit is less than 20% of the property value. When a group pools deposits, reaching 20% together is often more achievable than it would be alone, which can mean avoiding LMI.

For a clearer picture of how your deposit size changes your loan, our explainer on what LVR means for first home buyers sits alongside this guide.

The steps to buying a house together

The path from saving to settlement follows a fairly standard order, and a group purchase adds a few shared decisions along the way. The main steps are to save for a house deposit, work out what you can afford to borrow, find a home loan rate, find a house to buy, negotiate to buy your house, and settle on your new home.

If you buy at auction, expect to pay a deposit immediately, for example 10% of the purchase price, so the group needs that money ready beforehand. After settlement, stamp duty is a one-off state government property-transfer tax that you typically need to pay within 30 days. It is widely regarded as worth getting help from a solicitor or conveyancer to review the contract before signing, because a legal expert is the best way to avoid costly mistakes.

Shared loan, shared responsibility: what to agree on first

A joint home loan usually comes with joint and several liability. In plain terms, each borrower is responsible for the full repayment, not just their share. If one person cannot pay, the lender can pursue the others for the whole amount. That is true whether you are buying a house with 3 friends, buying a house with 4 friends, or buying property with family members.

There is also a longer-term effect worth knowing. While a joint loan is in place, the full debt usually counts against each borrower, which can affect how much any one person can borrow for something else later. A few things are worth agreeing on, ideally in writing, before you buy:

• Who pays what each month, and what happens if one person’s income changes.
• How the group would handle a sale, including what happens if one person wants to sell and the others do not.
• How an uneven deposit is recorded, so each person’s share reflects what they put in.
• Whether a co-ownership agreement makes sense to set all of this out.

These are legal questions, not lending ones. A solicitor can help you set up a co-ownership agreement that reflects what the group has decided.

Frequently asked questions

Talk it through with the team at Finance Lab

Buying a house with friends is a big shared decision, and the right structure depends on everyone’s circumstances. The team at Finance Lab can walk your group through your combined borrowing position, the deposit options, and how a joint loan would work for you. Get in touch to talk it through.