Common Mistakes When Choosing Property Ownership

When you're applying for your first home loan with a small deposit, how you structure ownership affects more than just whose name appears on the title.

It determines how much you can borrow, whether you qualify for government schemes, and what happens if your circumstances change. Getting it wrong can cost you thousands in Lenders Mortgage Insurance or lock you out of schemes designed to help buyers with limited savings.

Joint Tenants or Tenants in Common: Which Structure Suits Small Deposit Buyers

Joint tenancy means you and any co-owner hold equal shares and the property automatically passes to the surviving owner if one dies. Tenants in common allows unequal ownership shares and each owner can leave their portion to whoever they choose in their will.

For buyers using a guarantor or purchasing with someone who contributed more to the deposit, tenants in common often makes more sense. Consider a buyer purchasing with a partner where one person contributed $30,000 in genuine savings and the other contributed $10,000. Holding the property as tenants in common with a 75/25 split reflects the actual contribution and protects both parties if the relationship ends. If you're buying with equal contributions and plan to stay together long term, joint tenancy offers simplicity and automatic right of survivorship.

The choice matters for tax as well. If one owner earns significantly more than the other, holding unequal shares as tenants in common can shift rental income or capital gains to the lower income earner in an investment scenario, though this doesn't apply to your first home.

How Ownership Structure Affects First Home Buyer Schemes

Most government assistance programs require all owners to meet eligibility criteria. Under the Home Guarantee Scheme, every person listed on the title must be a first home buyer, an Australian citizen or permanent resident, and must intend to live in the property as their primary residence.

Adding a parent or someone who already owns property to the title immediately disqualifies you, even if they hold a tiny percentage. We regularly see buyers assume adding mum or dad for a 5% share won't affect anything, then discover they've lost access to the scheme and now need a 20% deposit instead of 5%. The same rules apply to state-based programs like the 5% Deposit Scheme and first home owner grants.

If a parent wants to help financially but you need to remain eligible, a guarantor loan keeps them off the title while using their property as security. They provide support without becoming an owner, and you keep access to every program available to genuine first home buyers.

Borrowing Capacity Changes When You Add a Co-Owner

Lenders assess every person on the title when calculating how much you can borrow. Adding a co-owner with income increases your borrowing capacity, but adding someone with debts or irregular income can reduce it.

In a scenario where a single buyer earns $75,000 and wants to purchase with a friend earning $65,000 but carrying $25,000 in personal loans and a car loan, the combined application might deliver less borrowing capacity than the first buyer applying alone. The lender considers both incomes but also both sets of liabilities and living expenses. Running the numbers before committing to co-ownership prevents situations where you assume two incomes will automatically mean a bigger loan, only to find the opposite.

If you're buying with a parent who's retired or semi-retired, their lower income might not add much borrowing power but their age can shorten the maximum loan term some lenders will offer. Most lenders require loans to be repaid by the time the oldest borrower turns 70 to 75, which can mean higher repayments if your parent is already in their 60s.

Changing Ownership After Settlement: What It Costs

Removing or adding someone to the title after you've purchased triggers stamp duty in most states, along with legal fees and potential capital gains tax. In Victoria, transferring a share of property to a spouse is exempt from stamp duty, but adding or removing any other person isn't.

If you initially purchased with a sibling to boost borrowing capacity and later want to buy them out, you'll pay stamp duty on the portion being transferred as if you're purchasing that share. On a property valued at $600,000, transferring a 50% share could mean $30,000 or more in stamp duty depending on your state and circumstances. You'll also need to refinance the loan to remove the co-owner from the mortgage, which involves application fees, valuation costs, and possibly break costs if you're on a fixed rate.

Planning ownership structure correctly from the start avoids these costs entirely. If you know your circumstances might change, discussing options like tenants in common with clear buyout terms, or using a guarantor instead of a co-owner, saves significant money down the track.

Sole Ownership With a Small Deposit: When It Works

Buying alone with a deposit under 20% is possible if your income supports the repayments and you meet the lender's serviceability requirements. Sole ownership keeps decision-making simple and means you build equity without sharing it, but it also means shouldering the entire loan and all ownership costs yourself.

Under the First Home Guarantee, single buyers can borrow up to 95% of the property value without paying Lenders Mortgage Insurance, provided the purchase price falls within the regional cap. For Melbourne, that cap sits well below the median house price in many suburbs, so you're typically looking at units or apartments rather than freestanding homes. If you earn enough to service a loan in that price range and have saved a genuine 5% deposit plus costs, sole ownership through the scheme is often the most straightforward path.

Sole ownership also protects you if relationships break down. There's no need to negotiate buyouts, argue over sale timing, or untangle shared finances. For buyers who value autonomy and have the income to manage repayments independently, it's worth considering even if adding a co-owner would increase your budget slightly.

Tax and Estate Implications No One Mentions Upfront

Ownership structure determines who pays capital gains tax if you later convert your home into an investment property, and who inherits your share if something happens to you. These feel like distant concerns when you're focused on getting into the market, but they matter.

If you own a property as joint tenants and one owner dies, the surviving owner automatically inherits the whole property regardless of what the deceased's will says. If you own as tenants in common, each owner can leave their share to anyone they choose. For unmarried couples or people buying with friends or siblings, tenants in common provides more control over what happens to your asset.

From a tax perspective, if you and a co-owner decide to rent out the property for a period, the rental income and deductions are split according to ownership percentage. If one person is in a higher tax bracket, structuring ownership to allocate more income to the lower earner can reduce overall tax, though you'll need advice from an accountant to get this right. Changing ownership percentage after purchase to shift tax outcomes doesn't work because the transfer itself triggers costs and scrutiny from the tax office.

Ownership Structure Matters Before You Sign Anything

You choose how to hold property when you sign the contract of sale, and changing it later involves cost and complexity. Thinking through your situation now, whether you're buying alone, with a partner, with family, or with a friend, means the structure supports your goals rather than working against them.

If you're not sure which ownership structure suits your deposit size, income, and plans, call one of our team or book an appointment at a time that works for you. We'll run scenarios based on your actual numbers and show you how different structures affect borrowing capacity, scheme eligibility, and costs before you commit.

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