However, more and more people are buying property together with friends, siblings or other family members, sharing the responsibility of building a deposit and meeting the mortgage payments. A recent survey conducted by Furniture Choice revealed that 38% of people would consider buying a home with friends.
So is buying a house with friends a practical move, or a recipe for potential disaster?
Why it’s a good idea
There can be many advantages to buying a home jointly with someone you know well. There are the immediate and obvious financial benefits of having someone else to help with the deposit, paying for the mortgage and covering other property-related expenditure – sharing the financial burdens of a household can work out much better than struggling to deal with everything yourself.
Many sharers also find tremendous social benefits in living with a close friend or family member, especially if you share interests – many students look back at their years of flat-sharing as some of the happiest times of their lives. With many renters having flatmates anyway, those eager to buy property might wonder why they couldn’t enjoy the same sociable living situation, but own the property as well.
The two main concerns that led people to consider buying a property with friends were that they could not afford to buy a property alone, and that they did not have a partner to buy with. As 30% have said they would rather live with friends, but also wanted to own a home, buying with friends seems like an excellent solution. For those who have long term friends also wanting to get on the property ladder, buying a home together can feel more secure than doing so with a partner.
Buying a property with a friend or sibling is a way to get onto the ladder, and if the property increases in value over the years, it may be an investment in a future property
As with any domestic relationship, it’s easy for friends who live together to fall out. This might be over something fairly minor, such as whose turn it was to take the bins out or to do the food shopping – or it could be a more serious matter like a missed mortgage payment or a dispute over whose responsibility it is to deal with a bill or pay for property repairs.
For those who would not consider buying with friends, the two main concerns were what would happen if they no longer got along, and not trusting their friends to make the initial large payment. Interestingly, those surveyed who would consider buying a home with friends said they would need to know the friend for 3-5 years, whereas they only felt they would need to know a partner for 2-3 years before buying a home together.
It is vitally important to fully and frankly discuss the ins and outs of the situation beforehand. You should mutually agree and record everything in detail: the deposit arrangements; responsibilities for payment of the mortgage, council tax, insurance, domestic bills and unexpected household expenditure; the division of household chores; ground rules for the use of common areas; smoking rules … and so on. It’s also important to know where current or future partners might stand in relation to the house – should they be allowed to move in, if your co-owner wants that? What would happen if one of you wanted to sell, or dissolve the agreement? What happens if one of you loses your job – who would cover those payments?
Pre-empt dealing with difficult situations – if you stopped getting along, would you move out and let the property? What happens if one of you can’t pay?
As much as you think you would get along well living and co-owning with your friend, choose someone who has good business sense and stability. This is as much a business arrangement as it is a living situation – struggling to survive because your friend has let you down financially can destroy a friendship.
The legal stuff
Once you’ve discussed the ins and outs of buying a house together, it makes sense to sign a legally binding document that each party must stick to no matter what happens in the future. Many people in this situation draw up documents using the same conveyancing solicitor who is dealing with the house purchase.
Legal documents such as a cohabitation agreement and a deed of trust can be used to set out clearly how the property ownership is divided (remember that a joint ownership between two parties needn’t necessarily be on a fifty-fifty basis) and, crucially, what should happen under certain circumstances, for example if one party gets married and moves out, or wants to sell or let out their portion of the property.
It is also worth considering setting up a joint bank account for the mortgage payments, council tax and any other joint property-related expenditure. However, be aware that linking yourself to another person financially always carries a risk – your credit score may be affected by the connection.
Getting a joint mortgage
Although not all lenders are willing to lend to people who want to buy property with friends, a number of companies – including major high-street banks – now offer this type of mortgage.
If you do choose to buy property this way, always remember that joint mortgage holders are “jointly and severally” liable for the mortgage debt, and this means that if your home-buying partner can’t pay his or her portion of the mortgage you will be fully liable to make up the shortfall.
Be aware that you will want to be ‘tenants in common’ rather than ‘joint tenants’, one difference being that your half of the property would be passed on to your next of kin, rather than automatically being transferred to your friend.
Buying with more than one friend can be complicated, especially in trying to find a home with equally large rooms, and meeting the criteria for three people is harder than two. However, it will significantly cut down on your costs, and could ensure your mortgage is paid off sooner.
Make sure you move forward on the same timeline – if your rental agreement is almost up, but your friend has not finished saving for their deposit, tensions will be high. Have a clear idea of how long everything will take, how and when you will make the payment, when you want to move, and have a back up plan ready.
Prepare to be open – discussing salaries and any previous debts is par for the course, and whilst it can sometimes be uncomfortable, it is best to be honest. This could not only affect your mortgage, and the type of property you could buy, but could create issues if there is a large monetary imbalance, or one friend has to take on more responsibility than another.
Everything from the mortgage provider you choose, to the location and type of property, to the sofa you pick for the living room is a shared decision. As soon as you move in, draw up an inventory of items in the house, who bought them, and the price of any large items you bought together. Whilst you may be aiming to live with your friend in your shared home for a long time, it’s important to remember that situations can change, and being aware and respectful of who contributed what to the home is one way of keeping everything clear and straightforward later on.
Buying a home with a friend can feel like a huge step, and it is not without risks, but they are similar risks to buying with a partner, or a family member. As long as you are clear about the goals and problems that come with buying a property and living together, and have a contract to turn to whenever you’re unsure, buying with friends can be a great way to get onto the ladder and live with the people you care about.
Check out this story from two friends who brought property together, in The Telegraph.
Updated August 2017