If gathering the funds to get onto the property ladder still feels a little out of your grasp, buying a house with a friend can seem like an obvious alternative.
There’s no doubt that having two pots to be saving in could help you realise your home ownership dreams much sooner, and make running the house more manageable once you do get your hands on the keys.
But – as is often the case – it’s not quite that simple. There are a few things to consider and pressing questions to answer before you make your decision, as buying a house with a friend won’t be suited to everybody’s circumstances or aspirations.
What are the benefits of buying a house with a friend?
The benefits of buying a house with a friend are mainly financial:
- You can divide the cost of the deposit and purchase fees between you, allowing you to reach your target sooner.
- You may find mortgage lenders view you favourably with your higher combined income – provided you both have good credit. Their positive view of joint applications is evidenced by the ever-growing number of joint and co-ownership mortgage products arriving to the market.
- Once you move in, you’ll be able to split the cost of those mortgage payments – along with any utility bills, council tax, insurance and renovation costs.
- As they’re your friend, we believe it’s also safe to assume you’ll view their company as a benefit, too.
What are the disadvantages of buying a house with a friend?
- You’ll have to weigh up the risk of someone else’s circumstances changing. Even if you’re confident you won’t encounter your own cashflow problems, you’ll need to consider the likelihood of your friend doing so, and plan for how you would manage if they find themselves in financial difficulty.
- You’ll be equally liable for the mortgage payments,no matter what. If your friend fails to pay or stops paying altogether, you will be legally responsible for the shortfall.
- The process of buying and owning is much more bureaucratic and you will need to keep records of all your transactions and agreements throughout, in case of a dispute.
- Even if your credit score is excellent, your friend’s credit history will affect your ability to get a mortgage – for better or worse. And once you own the home, you’ll be financially associated with them, meaning changes to their credit rating could impact your own.
- Things can get complicated if a time comes when one of you is ready to sell and the other isn’t. If you end up buying elsewhere, you may have to cover costs at two properties for a while, or consider having a lodger replace you to help keep up your part of the mortgage.
What to do if you’re considering buying with a friend
While there are certainly disadvantages, many of these can be overcome by being thorough and responsible:
- Only choose to buy with someone you trust. It’s important that you are always open and honest with each other, particularly where social and financial conflict areas are concerned.
- Get your solicitor to put together a legally binding cohabitation agreement, to protect your investment and interests. This will include things like:
- The share of the property you each own,
- How much you’ll contribute going forward,
- How you’ll handle the situation if one of you wants to sell,
- How disputes will be solved if they occur between you,
- How maintenance costs will be shared,
- Whether rooms can be rented.
- It’s a good idea to set up a joint bank account, where payments like your mortgage and bills can come out of. You could also use this account for house-related expenses, such as new pieces of furniture or repairs. This should make it much easier to track what’s coming in and out, and who’s contributed what.
- It’s advisable to have life insurance as well as a will and testament in place. This will clarify the situation when it comes to inheritance and financial support, should one of you pass away.
- Consider keeping a list or inventory of who owns what when you move in, and add items as you go - whether they’re shared or individually owned. This will make things much simpler if one of you moves out or you both decide to move on separately.
- Before you move in, try and establish a few house rules together. Consider things like smoking, pets, family and friends coming to stay, and noise. You’ll want to be a little lenient – you both own the home and are entitled to enjoy it as you see fit – but you’ll mutually benefit from a few boundaries.
Whenever you buy a home – with or without a friend – you’ll need to have buildings insurance in place, and should strongly consider contents insurance to keep your belonging protected. Begin your home ownership journey and get a home insurance quote from Rias today >