Buying a house with friends: The pros and cons

Buying a house with friends: The pros and cons
With property prices rising out of reach for many, particularly the Millennial generation (or Generation Rent as they are more commonly known), there has been an increase in joint ownership of property in the UK.

But even the closest of friendships could be tested by buying a house together and there is a lot to weigh up and consider before doing so.

Joint ownership of property in the UK

Most property purchases in the UK are made on a joint tenancy basis.

In the case of a married couple, for instance, they would own the property jointly and neither would have a specific share.

This works in the case of a married couple as, should one die, the property automatically transfers to the other joint owner.

However, if you are buying a property with a friend, there's a strong chance you would want to purchase a share of your property.

This means that your share can be left to someone else in your will.

Having shares in the property, known as a tenants in common, can also be beneficial if one co-owner puts more money towards the purchase deposit.

That could see them own a slightly larger share, ensuring fairness in the process.


Pros and cons of buying a house with friends

Firstly, sharing the costs of buying a home can mean both you and your friend(s) climbing that first step on the property ladder.

With the average deposit requirement for a first-time buyer having risen from £12,988 in 2000 to £20,622 last year, the costs of buying a home remain out of reach for many single first-timers.

Clubbing together to raise a deposit and combining two salaries for a mortgage can be a solid way to raise enough finance to own a property.

However, there are some serious considerations to make before deciding to buy a home with a friend...


1. Be honest about finances

Nobody wants to admit they have struggled with their finances in the past.

But failing to be up front with each other could cause problems further down the line.

Make sure you know everything you need to know about your friend's financial situation. All parties should check their credit history before applying for a mortgage and be honest about the results.


2. Establish your budget and what you can afford

It's always important to budget for a property purchase - regardless of whether you are a first-time buyer, experienced homeowner, couple or friends buying for the first time.

Be clear on how much contribution each party is making to the purchase and establish your maximum purchase price based on your incomes.

The best way to start is to use an online mortgage calculator, which will give you an idea of what you may be able to borrow from a mortgage lender.

It's important to note that the majority of lenders will allow three or four people on a mortgage application, but most will only take the top two salaries when running their affordability test.


3. Discuss what happens if one person wants out

This is where a tenants in common purchase can help, as owning a share of a property means you can sell, remortgage or even give away your share.

Joint owners cannot do any of this without agreement from the other owner.

It's important to discuss a scenario when one owner may want to sell their share of the property before you buy.

Even the strongest of friendships can be tested when money is involved so ask a solicitor to draw up a cohabitation agreement between you and the other buyer(s).

This agreement should state clearly:

 *  What share of the property each of you owns
 *  Each owner's deposit contribution
 *  How the property will be valued when one or more owners want to sell
 *  What happens to an owner's share should they die
 *  Split of maintenance costs and bills

Each owner should also have a will and life insurance in place.


Tips for buying a house with a friend

Away from all the financial considerations, you also need to consider whether you and the friend(s) you are buying with are compatible as housemates.

If you have rented together already then you should already have an idea of what it is like to live with your friends, but if you haven't, then you should consider renting together for six months to a year before committing to buying a home.

As well as knowing you are compatible living together, renting could also reveal any financial issues prior to buying together.

If your friend struggles to pay the rent, for instance, or doesn't contribute to bills on time, you might want to reconsider buying with them.

After all, if a mortgage payment is missed by them, you will be equally as liable for the debt.


If you are looking for a house to buy, take a look at our available properties for sale or speak to your local Parkers branch.