Co-Owning a Home With Friends or Family in NZ 2026: Protecting the Mortgage When You Buy Together

Buy a house with friends or family and each co-borrower is liable for the whole mortgage, not just their share. Here is how joint tenancy and tenants in common differ, what happens to the loan when a co-owner dies, and how life cover can fund a buy-out.

Buying a house with friends or family is one way more New Zealanders are getting onto the property ladder as prices stay high. It can work well. But it adds a layer most first-home guides skip: when several people share one mortgage, each of you is usually liable for the whole loan, and a death, a default or someone wanting out can put the house at risk for everyone else. This guide covers how joint tenancy and tenants in common differ, what happens to the mortgage when a co-owner dies, and how life cover can fund a buy-out so the home survives.

TL;DR: Co-borrowers on a mortgage are each liable for the full loan, not just their share. ⁴ So if a co-owner dies, the survivors can be left servicing the whole debt. Life cover sized to each person's share lets the others buy out the deceased's interest and keep the home, rather than being forced to sell. A written property-sharing agreement should sit alongside the cover. ⁷

Why are more Kiwis co-owning homes with friends and family?

Affordability is the main driver. The national median residential house price was around $770,000 in June 2025 — $990,000 in Auckland and $691,500 across the rest of the country. ¹ At those levels, a single income or even a single couple can struggle to assemble a deposit and service a loan alone.

Pooling resources with a sibling, a parent, or a couple of friends spreads the deposit and the repayments across more people. Government schemes point the same way: Kāinga Ora's First Home Partner shared-ownership scheme takes up to a 25% stake (capped at $200,000) alongside your deposit and mortgage, which is itself a form of co-ownership. ⁸

So the appeal is clear. The catch is that the legal and financial structure behind a shared purchase matters far more than it does for a solo buy, because more relationships and more "what ifs" are now tied to the same asset.

What's the difference between joint tenancy and tenants in common?

This is the first decision co-owners make, and it changes what happens to each person's share when they die. The two structures are not interchangeable.

Joint tenancy means you all own the whole property together, with no defined individual shares. When one co-owner dies, their interest automatically passes to the surviving co-owners by the right of survivorship — it cannot be left to anyone else in a will. A joint tenancy requires the "four unities" (the same interest, title, time and possession); if any is missing, ownership defaults to a tenancy in common. ²

Tenants in common means each co-owner holds a defined share — equal or unequal, such as 50/50 or 70/30. When a tenant in common dies, that share does not pass to the other owners automatically. It becomes part of their estate and passes under their will, or under the Administration Act 1969 if there is no will. ³

For friends and family buying together — especially where contributions are unequal, or each person wants their share to go to their own children or partner — tenants in common is usually the more relevant structure. ³ It is also the structure where mortgage protection planning matters most, as the next section explains. Which structure suits you is a legal question; talk it through with your solicitor before you sign.

What happens to the mortgage if a co-owner dies?

Here is the part many co-buyers do not see coming. Ownership and the mortgage are two separate things.

Co-borrowers on a mortgage are responsible for the full loan, not just their share. Each co-borrower has a primary obligation to repay from day one. ⁴ This is "joint and several" liability, and it is reinforced by the Responsible Lending Code: a person on a credit agreement can be liable for the full amount of the borrower's liabilities unless the lender has agreed to limit it. ⁵ So if one co-owner dies, the lender can pursue the survivors for the entire outstanding balance.

That creates a gap between the two structures:

• Under a joint tenancy, the deceased's ownership passes to the survivors automatically ² — but the survivors still owe the whole mortgage, now on fewer incomes.
• Under tenants in common, the deceased's share passes into their estate ³ — so the survivors may not even own the property outright, yet are still liable for the full loan.

There is also a delay problem. Transferring a deceased tenant-in-common's share generally needs probate or letters of administration once the estate exceeds the small-estates threshold of $40,000, which adds time and cost before anything can be resolved. ⁶ A property passing by survivorship under a joint tenancy can avoid that step for the property itself, but the mortgage liability remains.

The figure below walks through how these paths play out, with and without cover.

Figure: what happens to the loan if a co-owner dies

``` A co-owner dies │ ├─ Joint tenants │ ├─ With life cover ──▶ Cover repays the deceased's share of the loan; │ │ property passes to survivors by survivorship; │ │ mortgage cleared or reduced — home kept │ └─ No cover ─────────▶ Survivors own the property but still owe the │ full loan on fewer incomes — risk of forced sale │ └─ Tenants in common ├─ With life cover ──▶ Cover funds a buy-out of the estate's share; │ survivors acquire full ownership; mortgage met — │ home kept, estate paid out fairly └─ No cover ─────────▶ Share goes to the estate (probate/delay); survivors still liable for the full loan and may not own outright — risk of forced sale or dispute ```

Source: Ministry of Justice (estate administration); lender terms; general adviser practice. General information only.

How can life cover fund a buy-out of a deceased co-owner's share?

Life insurance pays a lump sum when the insured person dies. For co-owners, that lump sum can do two jobs at once: clear the deceased's share of the mortgage, and give the survivors the cash to buy out the deceased's interest from their estate.

Sorted (Te Ara Ahunga Ora) advises that anyone with a mortgage or dependants consider life insurance sufficient to clear the debt, and recommends a written agreement before buying property with others. ⁷ For co-owners, that translates into a few moving parts:

• Cover on each co-owner's life, sized to the share of the mortgage that person is responsible for, so the loan can be cleared or reduced without forcing a sale.
• A buy-out mechanism so the lump sum can be used to purchase the deceased's share from their estate — leaving the survivors with full ownership and the estate paid out fairly to the deceased's heirs.
• Liquid cover rather than relying on the estate, because probate and estate administration take time, and the mortgage repayments do not pause while that plays out. ⁶

This mirrors how business partners protect a shared company. The mechanics are close enough that it is worth reading our guide to shareholder protection and buy-sell agreement funding in NZ, which explains how cover and a funding agreement work together. The same logic applies to a home owned by friends.

Whether a claim is paid depends on the policy terms and your disclosure, so cover needs to be set up correctly from the start. An adviser can compare cover across the major NZ insurers — Partners Life, AIA, Fidelity Life, Asteron Life and Chubb among them — rather than tying you to one product, and size each policy to each owner's share.

What if a co-owner can't pay their share or wants to exit?

Death is not the only risk. A co-owner might lose their income, want to move overseas, or simply want out after a few years. Because each of you is liable for the full loan ⁴⁵, one person falling behind quickly becomes everyone's problem.

A few protections are worth building in:

• Income protection on each co-owner replaces a share of income if illness or injury stops someone working, so they can keep paying their part of the mortgage. Our note on which cover to set up first on a new mortgage walks through how to prioritise life cover and income protection when the budget is tight.
• An agreed exit process in your property-sharing agreement — how a leaver's share is valued, who has first right to buy it, and how much notice is required.
• A cash buffer so a short gap in one person's contributions does not push the loan into arrears.

These are practical, not dramatic. The point is to decide how you will handle a wobble while everyone is on good terms, not in the middle of one.

Do you need a property-sharing agreement as well as insurance?

Yes — they do different jobs. Insurance provides the money. The agreement provides the rules. Sorted specifically recommends a written agreement before buying property with others. ⁷

A good property-sharing agreement typically covers:

• Ownership shares and how they map to each person's deposit and contributions.
• Who pays what — mortgage, rates, insurance, maintenance — and what happens if someone falls short.
• What happens on death, including how life cover proceeds are used to fund a buy-out.
• Exit and dispute terms — valuation, first right to buy, notice periods, and how disagreements are resolved.

The agreement is a legal document, and Smiths Financial does not provide legal advice — that is a job for your solicitor. Our role is the insurance side: making sure the cover is sized and structured so the money is actually there when the agreement calls for it. The two need to be drafted to fit together.

How do you structure cover fairly between co-owners?

Fair usually means cover matched to each person's share of the loan and the deposit, not identical policies copied across everyone. A few principles help:

• Size each policy to that owner's share of the mortgage, so a claim clears their portion of the debt and funds the buy-out of their share.
• Account for unequal contributions. A 70/30 split in ownership and deposit should generally be reflected in the cover, not averaged out.
• Decide who owns each policy and who benefits, so the proceeds flow to where the buy-out and mortgage repayment actually happen. This is worth getting advice on, as it interacts with the property-sharing agreement.
• Review cover when things change — someone exits, a new co-owner joins, the loan is topped up, or shares are renegotiated.

For couples buying their first home together, the cover question overlaps with combining KiwiSaver and protecting two incomes; see our guide to buying a first home with a partner using KiwiSaver in NZ.

Cover can be compared across the major insurers rather than tied to one in-house product. Personalised advice works through what fits your particular arrangement.

Your co-ownership checklist

01. Decide with your solicitor whether joint tenancy or tenants in common suits your situation. ²³

02. Understand that each co-borrower is liable for the full mortgage, not just their share. ⁴⁵

03. Put life cover on each co-owner, sized to their share of the loan, to fund a buy-out. ⁷

04. Add income protection so a single illness or injury does not push the loan into arrears.

05. Get a written property-sharing agreement drafted, covering death, exit and disputes. ⁷

06. Review cover and the agreement whenever a co-owner joins, leaves, or the loan changes.

Frequently asked questions

If I buy a house with friends, am I only liable for my share of the mortgage? No. Co-borrowers are generally each responsible for the full loan, not just their share. If one co-owner dies or stops paying, the lender can pursue the others for the entire outstanding balance, unless the lender has specifically agreed to limit it. ⁴⁵

Should friends buying together choose joint tenancy or tenants in common? That is a legal decision for your solicitor, but tenants in common is often more relevant for friends and family — it gives each person a defined share they can leave to their own heirs, whereas a joint tenancy passes automatically to the survivors. ²³

What happens to a co-owner's share if they die without a will? Under tenants in common, the share passes into their estate and is distributed under the Administration Act 1969 if there is no will. Transferring it generally needs probate or letters of administration once the estate exceeds the $40,000 small-estates threshold, which takes time. ³⁶

How does life insurance help when a co-owner dies? A life cover lump sum can clear the deceased's share of the mortgage and give the surviving owners the cash to buy out that share from the estate — so they keep the home instead of being forced to sell. Whether a claim is paid depends on the policy terms and disclosure. ⁷

Do we still need a property-sharing agreement if we all have life cover? Yes. Insurance provides the money; the agreement provides the rules — ownership shares, who pays what, and what happens on death or exit. Sorted recommends a written agreement before buying property with others. The agreement is a legal document for your solicitor. ⁷

Can an adviser help us set up cover for a shared purchase? Yes. An adviser can size cover to each person's share, compare policies across the major NZ insurers, and structure ownership of the policies so the proceeds reach the right place. This is general information; book a conversation for advice tailored to your arrangement.

General information, not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Seek advice tailored to your circumstances before acting. Whether an insurance claim is paid depends on the terms, conditions, exclusions, stand-down periods and underwriting of the specific policy, and on your disclosure — always read the policy wording. Smiths Financial does not provide legal advice; consult your solicitor on ownership structures and property-sharing agreements. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 29 July 2025.