Do you dare get a mortgage with a friend?

By Natasha Culzac

Desperate to buy but don't have a partner to do it with? Check out the pros and cons of buying with a mate.

A fair few of us dream of one day owning our own property. And a sprawling 50-acre estate in the Cotswolds with the love of our lives would be nice but let’s face it, a one-bedroom flat above a fried chicken shop would be, too. And yet sometimes even that is out of reach. For those without a financially-ready partner, could going in on a property with a mate solve all your problems?

Maybe it could! What are the benefits?

A potential upside is that you may be able to get a larger mortgage than if you did it alone, which could mean a bigger property or one in an area that you actually want to live in.

You’ll also be able to share the cost of, well, practically everything, including splitting the deposit, stamp duty, legal fees, survey costs, as well as the subsequent mortgage payments and any maintenance and repair that the pad requires, not to mention household bills.

Rather than wait for ages to save up a big enough deposit on your own, buying with a friend now could see you sell in five years’ time and go home with a chunk of equity (should the property sell for more than you paid for it).

Well, it seems good so far. What are the downsides?

There are many extra considerations when you’re thinking of moving in with a friend. Firstly, it might sound silly but can you actually live with this person? As the old saying goes – you don’t know someone until you’ve lived with them. It would be a heinous mistake to sign on the dotted line with a friend you’ve never lived with before, only to find out a month down the line that they like to stay up playing the Xbox on full blast till 4am every night when you get up for work at 6am. It might be worth moving in together temporarily just to see that you do gel well.

Secondly, is this mate financially solvent and reliable? When you buy with a partner you’ve probably already examined each other’s spending habits, debts and bank balances. Whereas how often do you talk personal finance with your BFF? Everyone hates talking about money. And what if it transpires that this friend might have a decent-paying job, but also has £15,000 in outstanding debt and who can barely keep their head above water each month? You’ll have to make sure you get down and dirty with each other’s finances.

Thirdly, think about future partners and how they might come into play. Would your mate mind if a fledgling romance became serious and you wanted to move your bf/gf in? Is there enough space in the property for two couples, if that should be a potential situation in the years to come? What if you have dreams of travelling the world - would they mind you renting your room out? You’ll need to be frank about your life plans.

Is there anything else to consider?

Yes. There are the real-world consequences to the considerations we explored above.

- If you get a joint mortgage with someone their credit rating affects yours (this can be negatively if they have a poor credit history).

- Both you and your mate are responsible for the entire mortgage, not just your half respectively. So, if your friend defaults on payments you are required to make up the shortfall.

- One of you can’t just ‘get out of the mortgage’ if things sour or if one of you is ready to sell and the other isn’t. The lender will need to assess the situation and be confident that the remaining person can adequately meet the needs of the mortgage solo.

- Up to four people can get a mortgage, so it’s possible that a group of friends can buy together. However, a lender will usually take into account the salaries of the two people paid the most.

What practical things can me and my friend do?

- This is perhaps one of the best things you can do: get a solicitor to draw up a Declaration of Trust. This is a legally-binding document which outlines how much each party spent on the deposit, what share of the property you both own, how much you’ll individually spend on monthly repayments and, importantly, how you will split the costs and any equity should you go your separate ways further down the line. It can also declare what will happen to the property and your shares should one of you marry or die.

- Chat about how much you both want to spend on renovations and decoration as you may have differing opinions. This also goes for views on stuff like smoking inside, pets, the buying of loo roll, the washing up…

- Think about opening a joint bank account for all house-related bills to come out of.


Top Takeaway

Buying a property with a friend can help you get on the ladder and can be a way for you to earn some equity, which could later serve as a decent deposit on a place of your own. It’s also a good way to share the various other costs relating to house-buying, such as fees, but there are plenty of potential pitfalls, so it’s important that you all understand exactly what you’re getting yourself in for. If you’re not keen on the idea of buying with a friend, consider what help there is for buying alone, such as shared ownership and the Government’s Help to Buy  schemes.

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