Posted on 3rd July 2015

Is it Wise to Buy Property with a Friend?

Martin Williamson, Head of Residential Property

The famous quote by To Kill A Mockingbird Author Harper Lee says that you can choose your friends but you cant choose your family. But, does that necessarily mean youd want to buy a home with friends?

With many people struggling to get onto the property ladder, increasing numbers of home buyers are choosing to share the cost of purchasing a house with a friend.

Particularly for single people who have no significant other to share costs with, it can be a sensible move. It means you can share the burden of saving up for a deposit, along with initial legal costs and fees.

You could also be able to buy a bigger house, or a property in a more favourable area than you would otherwise have been able to and you can share ongoing mortgage repayments and maintenance costs.

A mortgage lender will not discriminate against co-borrowers who arent married or related. They will simply want to examine each partys finances, including earnings and spending. But, purchasing a house with someone who you arent bound to by family ties can come with pitfalls.

Its important to seek expert legal advice even before you start your house hunt so you know exactly what you are entering into, and what the repercussions could be.

You need to think about what could happen if circumstances change. What would happen if one of you wanted to sell but the other one wanted to stay put? What would happen if one of you met your future wife or husband and decided you wanted to move out?

You also need to be aware that your friends credit rating could affect your own. When you link together on a mortgage, that will be flagged up in your credit profiles so any negative issues on your friends records could impact on your own. Perhaps most worrying is the fact that if one of you stops paying his or her part of the mortgage, the other one will have to pay the full amount.

If you weigh everything up and decide the advantages outweigh the disadvantages, then it usually makes sense to opt for a short-term fixed rate mortgage product as your circumstances are more likely to change than those of a married couple, for example.

There are two different ways you can buy a property with friends. A Joint Tenant agreement means each party has equal ownership. Its usually the option chosen by spouses or partners because if one owner were to die, the whole property would legally belong to the other, regardless of what was said in their will.

A more popular choice for friends is to take on a Tenants in Common agreement. You can specify how much of the property each person owns, so it is easier to work out how much equity should go to each owner in the event of a sale. Crucially, if one party dies, their share of the house will pass to whoever is specified in their will, so its vital to have a will drawn up as you move forward with buying your shared home.

While its natural to concentrate on the buying process itself, its important to make sure you dont hit any bumps as you start to live together. A joint account is a good idea so you can set up direct debits for bills and reduce the potential for disagreements. You could also think about a co-habitation agreement which can put such things in writing as the deposit paid by each person, how ongoing costs will be shared and what happens if anyone breeches terms.

So long as you go into it with your eyes wide open, buying with a friend can be a good way to get into the property market.

Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: www.latimerhinks.co.uk or call 01325 341500.

Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise.

For further information please contact Martin William