With the soaring rate of house prices in the UK, getting on the property ladder is an increasingly difficult task for first time buyers and consequently more people are choosing to buy a house with a friend or member of their family. By sharing the deposit and mortgage repayments single people who do not have a large enough deposit or income to secure a mortgage are able to own part of a property and raise capital for future investments. Purchasing a house with a friend or family member does come with risks and both parties should consider the benefits and drawbacks carefully before entering into joint ownership, but providing each party follows the recommended procedures and seeks legal advice the risks can be kept to a minimum and co-buying can be very profitable.
There are many significant benefits that come with buying a property with a friend or member of the family but most people chose to do it because it allows them to move up the property ladder much sooner and more easily than they would otherwise be able to. Other benefits of joint ownership may include:
- Shared deposit – joining with another party means the deposit is split so joint owners don’t have to spend as long saving up for enough capital.
- Shared initial costs – purchasing a property can incur hefty legal costs and solicitor fees but joint ownership means short term and long-term costs are all shared.
- Larger mortgage – having a co-buyer may mean that the purchasers can consider a bigger house or more favoured area than they would otherwise be able to.
- Shared mortgage repayments – sharing mortgage costs means that the mortgage term can sometimes be shortened and interest costs are then reduced.
- Shared maintenance costs – it is not just mortgage and purchasing costs that are shared when buying a house with a friend or family member. All bills and decorating/maintenance costs can be shared between each party.
- Formal deed and agreement - The formal deed and agreement that joint owners are encouraged to draw up means disputes are more easily solved than if buying a property with a spouse or partner.
There are also specific drawbacks to consider when buying with a friend or family member that are less likely to occur if buying with a spouse of partner. These include:
- Added legal costs – the formal deed and agreement required by co-buyers means that more solicitor fees will be incurred.
- Disagreements – there is the possibility of any number of disagreements when sharing ownership, most commonly that one party may want to sell their share of the house before the other party is ready to move on.
- Financial complications - Working out finances can get complicated, especially if one party pays more of the deposit than other.
There are various procedures house buyers must go through when investing in a property with a friend or member of a family. It is important to seek the advice of legal and financial professionals in order to ensure the process incurs as few risks as possible.
Borrowing a mortgage
As with a single owner’s mortgage, the amount of money that can be borrowed by joint owners depends upon the combined income of the two parties. Today, more and more banks offer various mortgages aimed at friends and family members buying together and independent mortgage advisors are also informed about the pros and cons of the different mortgages available.