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Home Property

Stressing the house stuff: How to Ease the Burden When buying a home with Friends

by Lewis Humphries
01/06/2016

Due to the continuing increase in house prices, especially in the capital, many young people are now looking at alternative ways to afford a property and get on the first rung of the housing ladder. Even though the rate of growth is declining as experts begin to forecast a property market crash, the value of housing soared by an average of 10.4% year-on-year in April. This is pricing many out of the market through conventional means, as new methods of investing real estate are explored and embraced.

One method that is growing in popularity is to buy a property with friends.

This can be a much more cost-effective way rather than attempting to save up enough for your first mortgage and offer many benefits. There can be a few downsides, such as if you and your friend(s) fall out or one person’s circumstances change to affect the property ownership. If you’re thinking about buying a property with friends there are a few things you can do to make the process easy, seamless and ultimately rewarding!

Work It Out

The first thing you’ll have to do is work out your combined budget. This should give you a good idea of the size and type of property along with ideal area for purchasing one. The majority of lenders will allow you to borrow around three times your income.

Aim to put down a deposit of between 10 and 25% of the house’s value, the higher the amount the better the rate. This will be a lot easier to cover if there are two or more of you chipping in.

Take Out Tenancy in Common

Taking out a mortgage with friends is different from buying with a partner. Unlike joint tenancy, tenancy in common is favoured by friends and relatives buying together. With tenancy in common, all owners have equal rights to possess the whole of the property.

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This can be split 50/50, or if one of you pays a higher proportion of the mortgage then it can be split differently. This will all be drawn up in the mortgage contract to make it clear. Find out more about first time buyer mortgages.

At this stage, it is also important to determine if either you or friend have any existing debts. Secured debts or country court judgements can be levied against property, for example, so it is important that you understand the risks and each other’s financial circumstances prior to undertaking the purchase (and determining ownership).

Set up a Joint Bank Account

Setting up a joint bank account will help things run a lot smoother once you move into the property. Rather than the mortgage payments coming out of two or more accounts, this makes it easier to track payments and ensure the costs are covered.

It can also be used to pay for all the property’s bills and is good for keeping a record of each house owner’s contributions. This should cut down and prevent any arguments that may arise due to money. These few steps will make buying a property with a friend or two a lot easier in the short and long term.

Tags: Investmentmoneypropertyreal estate
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