Guide to Buying a Home with Friends

It is primarily the financial aspect that is a challenge for first-time buyers to go it alone, with high house prices, large deposits and strict lending restrictions. To work around these challenges, it is common for friends to team together to buy a home together.

While buying a home with friends is an exciting prospect and a great way to save money, some other aspects should be considered before taking the leap.

In this blog, we explain everything you need to know before buying a home with friends so that you can reap in the benefits rather than ending up worse off.

Things to Think about Before Buying a Home with Friends

There are numerous areas to discuss before taking the plunge to buy a home with friends, so here are just some points to consider beforehand.

Everyone is Responsible for Mortgage Repayments

It is essential that you discuss with your friends each of your financial situations. Ask questions such as:

• What is your monthly income?
• How much can you put towards mortgage repayments?
• When do you get paid each month?

If one person cannot make a payment, everyone is liable to cover the cost.

Discuss How You Will Pay for the Costs of the Property

When buying a home, there are many costs to consider. Take a look at our previous blog that looks at the hidden costs of buying a home for more information.

It could be a good idea to set up a bank account for the home that you can all set up direct debits to. By doing this, you can be assured that all members will pay their way and no mortgage repayments or bills will be missed.

Establish Each Person’s Share of the Property

If you are all putting in different sums of money for the mortgage deposit, you should consider the proportion each deposit amounts to and how you will split the money if and when you decide to sell.

Talking about this at the beginning can save any future disagreements. It can also make people think about whether or not it is a good idea for them personally to enter an agreement and mortgage.

Talk About What Will Happen if One of You Wishes to Leave

If one person decides to leave the property, it is likely going to be down to the remaining people to buy their share. If there are a few who remain invested after one owner has left, this situation can be slightly easier to manage, but if you and one other friend are buying together and they decide to leave, it could be harder to afford it alone.

If you find that you cannot afford your friend's share of the property, the only other options are for your friend to sell their share to someone else or you agree to sell the whole property and split the money from the sale.

The Basics of a Joint Mortgage

Unless you have the money to purchase the property outright, and you would like to buy a home with friends, it’s likely you will require a joint mortgage.

What is a Joint Mortgage?

When you apply to borrow money to purchase a home with someone else; such as your partner, friend or relative. Everyone who applies for the joint mortgage will have to meet a lending criterion and will be liable for the mortgage repayments.

What is “Tenants in Common”?

When setting up a joint mortgage, you must choose how the ownership of the property will be legally defined. Legal advice is recommended before making the decision, but if you are looking to buy with friends, then a “Tenants in Common” ownership is likely your best route.

A “Tenants in Common” ownership is suitable for those looking to buy a home with friends or family members. Here is a basic overview of the ownership definition:

• All members of the home can own different shares of the property
• If one tenant passes away, you won’t automatically inherit the property
• You can choose who you will leave your share to in your will.

To avoid any misunderstandings or problems, it is advised to speak to a solicitor about setting up a deed of trust; this will set out how much of the property each person owns.

You Can Now Confidently Begin House Hunting

Once you have considered all of these options, if you deem it to be a financially smart option, then it’s time to get excited! You can begin to decide what is best for each of you, start looking at properties and attending viewings. For some tips on property viewings, take a look at our previous blog to ensure you get the most out of your visit.

If you are interested in moving to Devon, why not chat with us? Godfrey, Short and Squire is an estate agent in Okehampton, and we help people to buy, sell, rent and let properties across West Devon. Give us a call on 01837 54504 and chat to one of our friendly team members; we can discuss what you are looking for and begin sharing with you some properties that are suited.

For more information on who we are and what we do, head over to our social media channels!