Ed Boden
Head of Sales
We look at the pros and cons of buying with a friend, including how to keep your friendship intact throughout the process.
Why buy with a friend
First and foremost, living with your best friend can be great fun! It’s a chance to cement your friendship to mutual benefit. You can put down roots in an area, and if you’re no longer keen on renting, you’ll be putting your money towards owning your own property.
A common challenge is saving for a deposit. Friends with healthy salaries but limited savings will benefit from pooling their resources. And splitting a deposit and mortgage payments can mean that you could afford a larger property in a nicer area.
Buying with a friend means you are going through the process with someone you know and like. It also eradicates the trouble of finding a suitable tenant to rent the spare room in a home you own on your own.
Purchasing a property jointly is a huge commitment, and, for the sake of your relationship, it’s important to go about it the right way. Here’s what you need to consider if you’re looking to buy a property with a friend.
Make sure it’s the right decision
The last thing you want is for a friendship to breakdown over a house, so if you need to be a hundred percent certain that being tied together financially won’t put a strain on your relationship.
Before you both commit, it’s worth having a frank discussion about:
•How much each of you can contribute in terms of deposit, and whether the deposit is dependent on parents or other lenders approving the purchase
•Limits on monthly mortgage payments
•How you will own the property (as joint tenants or tenants in common)
•What happens when one of you wants to sell the property.
If there are more than two of you buying the property, it’s even more important to make sure you come to an agreement you’re all happy with. Some mortgages allow up to four people to be listed on the application, but lenders will typically take the top two incomes into account when carrying out their affordability assessment.
Work out what you both want
A joint purchase is only likely to work when you both want the same thing. If you want a two-bedroom apartment in central London, but your friend has set their heart on a three-bed house with a garden in Bromley, one of you is going to end up disappointed.
Before you start looking, work out what you can realistically afford and draw up a list of features and priorities for your property.
Looking online can be a good starting point, but to cut to the chase go directly to a local agent and talk to them about what you’re after. They’ll be able to advise on properties which fit your priorities and budget, and where you may need to compromise.
You will need to devote some time and focus to your search. Hours spent online are no substitute for viewing a property in real life. Most people will view 10-20 properties before reaching a decision. This is the crunch time: if you’re struggling to find something that you both like then you may just have to accept that a joint purchase isn’t in either of your best interests.
How a joint mortgage can be split
If you’re taking on a joint mortgage, there are two ways the mortgage can be split:
•Joint mortgage. If you’re buying with a partner or spouse, then you may opt for a straightforward joint mortgage. This means that if one of you were to die, their share of the house would automatically pass to the other person.
•Tenancy in common. This is more common for friends or family members buying a property together. You each own a different share of the property, and you can choose who will inherit this when you die.
Whichever option you go for, you will be jointly responsible for paying the full loan, and the mortgage lender could chase you for arrears if the other person fails to pay. It’s worth going to a mortgage broker, rather than directly to a lender, as they’ll be able to advise on the best mortgage to suit your circumstances.
Get legal agreements in writing
However close you are to the person you’re buying with, you must see a solicitor and get a legal agreement in writing. This should cover the money you’re both putting into the property and an exit strategy for when you decide to sell. The amount each of you gets back from the sale should be proportionate to the amount you put in, both in terms of deposit and mortgage payments.
You may also want to include in the agreement who will handle repairs and maintenance and how other costs will be split, for example, payment of bills and purchase of white goods.
What happens if one of you wants to sell
You should agree what the process will be if one of you wants to sell the property or buy the other person out. If you’re purchasing the property purely as an investment, it’s worth discussing at the outset timeframes for the investment, and at what stage you’re likely to want to sell.
When choosing a mortgage, remember that your individual priorities and circumstances will change in the future. Committing to a five or ten-year mortgage risks high early-repayment fees if one of you wants to sell up or could force you to continue in an arrangement which you’re no longer happy with. It may be better to opt for a two-year deal, and every two years, sit down and discuss whether you’re happy to continue the arrangement or if one of you wants to go their own way.
By having these discussions up-front, you can be sure that buying together is the best decision for both of you, and that whatever happens in the future, your friendship will survive.
Enjoy your new home
Buying a property is an incredibly important decision and, all being well, at the end of the process you’ll be moving into your new home together.
Once the purchase has completed and you have the keys, take time to enjoy the moment, and mark the occasion with a toast or a well-deserved cup of tea. Celebrate what you’ve achieved, and then start planning how to put your mark on your new home!