Purchasing a property – whether that be as an investment or to reside in – is still difficult to achieve for many first time buyers. With more people deciding to purchase properties with friends, this makes home ownership more accessible, but what should you consider before taking the plunge?

What are the advantages?

There are a number of advantages to purchasing a property with a friend that make it so appealing, such as:

• Financial benefits: With property prices on the rise, it makes it difficult for first time buyers to get on the property ladder. Purchasing with another person combines two deposits and incomes when it comes to applying for a mortgage. Also, once you own the property, all monthly expenses are shared.
• Shared responsibility: As you will jointly own the property – rather than one of you renting a room from the other – you will both be equally invested in ensuring the property is looked after.
• Social benefits:  Living with someone who you get on well with has great social benefits, making the time spent in the house more enjoyable.
• Equity: Unlike renting, being a homeowner means you are building equity as you pay off your mortgage, which will be useful when you come to sell the property

What are the disadvantages?

Although there are numerous reasons why a joint purchase is appealing, there are disadvantages that you should take into consideration before you look to purchase, such as:

• It is difficult to move out: Since both names would be on the mortgage, you are both responsible for making the monthly payments – even if one of you wants to move out. To remove a name off the mortgage, you would either have to sell the property, or re-mortgage the property under one name.
• Disagreements over responsibilities: It isn’t easy to jointly own a property with someone, and friendships can be tested when met with disagreements over who is responsible for what. To avoid this, it is advised to have a written agreement that includes details regarding shared responsibilities.
• Changes in personal circumstances: Each of you will be responsible for the monthly mortgage payments, and if one of you fails to pay, then you will be liable to cover what is missing.
• It may be difficult to secure other loans: Although you will be splitting the mortgage payments 50/50, in the eyes of other lenders, each of you alone is responsible for covering the entire mortgage payment. If you wish to take out any further loans, this may make it difficult to qualify for them.
• Missed payments: most mortgages are a joint and several debt which means you are all equally responsible for all the payments due not just 50% or a share proportionate to the number of owners. If one party moves out and doesn’t pay and you can’t afford to cover the payment your credit file may be affected and the property could be repossessed by the lender

There is the well-known common saying “Never Mix Business With Pleasure”. This equally applies to buying a house with a friend! Living together can test everyone even married couples or civil partners!

What else should you consider?

You should take sensible precautions when purchasing a property with a friend, and it is advised that you enter into a legally binding agreement often referred to as a “Declaration of Trust” that stipulates:

• What share of the property each of you own.
• How much each of you will put down as a deposit, and mortgage contributions.
• What will happen if one or both of you wishes to sell.
• What happens in the event of the death of the either of the owners.
• Specific procedures for dealing with any disputes or disagreements.
• How costs will be shared.

Entering into an agreement will leave you safe in the knowledge that your investment is protected, putting your mind at ease as you move through the purchase process.

How we can help

If you are looking to purchase a property with a friend, or family member, then we can assist you. We have a friendly, dedicated and specialist property team that can assist you wherever you are based.

Our team appreciate that the process of purchasing a property can be stressful, we will take the time to understand your needs and provide you with expert legal advice.

Location 

Our Solicitors are able to provide expert advice across the country with a network of offices based in: Chesterfield, Nottingham, Mansfield and Derby.

How to get in contact 

Our team are on hand to help you and can assist wherever you are based. Please call us for a no-obligation, initial discussion on 0330 333 2613 or email enquiries@elliotmather.co.uk and we will call or email you back.

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