Co-Borrower Guide Australia 2025: Pros, Cons & New Lending Rules

Thinking of taking out a loan with someone else? In 2025, co-borrowing is more popular than ever, with Australians teaming up to boost their borrowing power and tackle the property market. But before you sign on the dotted line, it’s crucial to understand how joint borrowing works, the latest lending rules, and the risks and rewards involved.

Why Co-Borrowing is Booming in 2025

The Australian property and finance landscape has shifted rapidly in recent years. With house prices still high and lending criteria tighter, more people are exploring joint loans—whether with a partner, family member, or even a friend. According to recent data from the Australian Bureau of Statistics, over 30% of new home loans in 2025 involve two or more borrowers, a sharp increase from just five years ago.

Several factors are driving this trend:

• Affordability pressures: Rising property prices have made solo borrowing tough, especially for first home buyers.
• Higher borrowing capacity: Lenders assess combined incomes, meaning co-borrowers can often access larger loans.
• Government policy changes: In 2025, expanded eligibility for first home buyer schemes now includes certain co-borrowers, such as siblings and friends, not just couples.

How Co-Borrowing Works: Structure, Liability, and Flexibility

When you co-borrow, each applicant is jointly and severally liable for the entire loan. That means both (or all) borrowers are responsible for repayments, regardless of who uses the funds or who lives in the property. Here’s what to know:

• Joint Tenancy vs. Tenants in Common: For property loans, your ownership structure matters. Joint tenants own equal shares, while tenants in common can split ownership unequally—useful for friends or family buying together.
• Credit assessment: Lenders review all applicants’ credit histories and incomes. A weak credit profile for one borrower can impact approval or interest rates for everyone.
• Exit strategies: New in 2025, major banks now require co-borrowers to outline an exit plan—such as buyouts or property sales—at application, aiming to protect both parties if circumstances change.

Real-world example: Emma and her brother Josh teamed up to buy an apartment in Brisbane. By combining incomes, they secured a $700,000 loan—$150,000 more than Emma could borrow solo. They chose tenants in common, each owning 50%, and set up a legal agreement to handle future changes.

Risks, Rewards, and What’s Changed in 2025

Benefits:

• Access to larger loans and better properties
• Shared deposit and ongoing costs
• Broader eligibility for government grants and schemes (such as the expanded First Home Guarantee in 2025)

Risks:

• If one co-borrower can’t pay, the other is legally responsible for the full debt
• Relationship breakdowns can complicate loan management and property ownership
• Refinancing or selling can be complex if parties disagree

What’s new in 2025?

• Lender scrutiny: ASIC has tightened responsible lending checks for co-borrowers, requiring clearer documentation of each party’s financial contribution and benefit.
• Flexible loan products: New split-loan options allow co-borrowers to separate portions of a loan, helping manage repayments if one party wants to exit early.
• Legal protections: Popular banks now offer mediation support for co-borrowers, reflecting the complexities of joint lending relationships.

Making Co-Borrowing Work: Tips for a Smooth Experience

• Have a co-ownership agreement: This legal document sets out how repayments, ownership, and exits will be handled. It’s now strongly recommended by most lenders in 2025.
• Budget for all scenarios: Consider what happens if one borrower loses income, wants to move, or the property value drops.
• Keep communication open: Regular check-ins and financial transparency can prevent misunderstandings.

Co-borrowing isn’t just for couples anymore—friends, siblings, and even parents and adult children are teaming up. With the right planning and awareness of 2025’s policy changes, joint borrowing can be a powerful way to achieve your financial goals.