Buying a house with a friend

We all know that home ownership can be costly, but did you know that buying a house with a friend can be a smart way to get on the housing ladder?

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Of course, taking out a joint mortgage with a friend is not to be taken lightly, so we’ve outlined some considerations to help make your purchase worthwhile and to keep you from causing lasting damage to your personal relationships.

Pros and cons of buying a house with a friend

Purchasing a property with a friend can be beneficial for all parties. Here are some of the benefits to buying a house with a buddy:

  • Greater spending power – your combined earnings should allow you to borrow more than if you bought on your own, giving you more choice in the property market.
  • Shared costs – everything from stamp duty to solicitors’ fees will be split between you, as well as ongoing bills and maintenance.
  • Financial security – paying a mortgage on your own can be daunting, but pooling your resources means you’re not dependent on one salary.
  • Shared responsibility – if the boiler breaks, it’s not all on you. Another helping hand can make life easier when it comes to maintenance.
  • Social life – owning together means you’ll rarely find yourself alone for long periods.

Despite these benefits, there are certain pitfalls when buying a house with a friend. Here are some of the potential drawbacks to consider:

  • Friendships can turn sour – while no-one wants to fall out with their friend, having joint responsibility for a property can inevitably lead to conflict, especially while living in the same building.
  • Impact on relationships – your living arrangements can become more complicated if you or your co-owner has a current or future partner. If your partner moves in, will they contribute towards the bills?
  • Selling the property – you may not be able to sell your share at the perfect time. The remaining person will need to buy the equity stake of the person who’s leaving, as well as persuade the mortgage lender that they can make the repayments on their own. Otherwise, someone else will need to buy the share, or you’ll have to sell the property.
  • Legal complexities – you’ll need to agree various details in advance, such as whether rooms can be rented out and what happens if one person dies.
  • Bad habits – co-owning a home is a serious commitment, and while living with strangers might encourage you to be on your best behaviour, trusted friends can easily become lax when it comes to everyday tasks like cleaning. 
  • Lifestyle changes – if you’re a party animal now, what about in the future? Consider how your lifestyle needs may change; for example, you may be planning on having a family.

What’s the difference between joint tenants and tenants in common?

When you take out a joint mortgage with a friend, you can decide to own the property either as ‘joint tenants’ or ‘tenants in common’. If you select the former, you’ll have equal rights to the whole property, but it will automatically be transferred to your co-owner in the event of your death. Moreover, you’ll be unable to pass on the ownership of the property in your will.

In contrast, as ‘tenants in common’ you’ll own different shares of the property, you can pass on your share in the will, and the ownership won’t be automatically transferred to your co-owner when you pass away. Your joint ownership status should be defined in a cohabitation agreement drawn up by a qualified solicitor. This agreement can also cover technicalities such as the precise share of the property you own, procedures for dispute resolution and how maintenance costs are shared .

Purchasing a property with friends is no walk in the park, but with the right mindset and preparation, joint ownership can be both personally rewarding and profitable.

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