With property prices making home ownership unachievable for many young adults, more are turning to buying a property with a friend. It is estimated that almost 20% of first-time buyers now purchase with a friend rather than with a partner or as a solo buyer.
So, how easy is it to buy a property with a friend? What do you need to consider? Is it a good idea? Our new guide will tell you everything you need to know!
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Yes, you can. In fact, it’s becoming an increasingly popular option for young people wanting to get on the property ladder.
Buying a house with a friend is a way for people to own their own home if they don’t have a partner they want to buy a house with and are unable to afford to purchase a home on a single salary.
Of course, buying a property with a friend is a big, long-term commitment, so there are lots of things to consider. For many young people, however, it’s a much more attractive prospect than spending thousands of pounds a year on rent and having little to show for it.
There is much to consider if you’re thinking about buying a property with a friend.
You should start by asking yourselves the following questions:
If you’re considering buying a property with a friend (or friends), it’s important to have an honest conversation about what each of you are able to contribute financially.
You’ll need to consider:
If you’re planning to buy a property with a friend, you’ll need to consider what you both want and need in a property. Do you need space to work from home? Are you keen to have outdoor space?
It can be helpful to come up with a list of ‘must haves’ and ‘nice to haves’ to help narrow your search and shortlist suitable properties.
This may be largely dictated by what your budget can afford, but it’s important to think carefully about location.
You may want to consider commute time, local amenities, and distance to friends and family.
Once you’ve got an idea of budget, and have thought about location, ‘must haves’, and ‘nice to haves’, it’s time to look at what type of property you can afford in the area of choice.
It’s important to be realistic about what you can afford and where compromises need to be made. Strong communication between you and your co-buyer(s) will be vital throughout this process.
Whilst buying a property with a friend can make great financial sense, it’s not a short-term commitment.
Before going ahead with a property purchase, it’s important for each party to think through how their lives and needs might change over the next 5-10 years. Will the property you’re considering buying still meet your needs in several years?
Unlike buying with a partner, few friends will buy a house with a friend thinking they’ll stay living with that friend “until death do us part”. For most, it is a way to get a foot on the ladder and start building equity, with a view to eventually buying another property either on their own or with a romantic partner.
So, what happens when a change in life circumstances – a job, a relationship or finances – means one of you wants to sell?
It’s important that you think and talk this through with any friend(s) you’re considering purchasing a property with.
Options you could consider include:
Applying for a mortgage with a friend is similar to any other joint mortgage application. Both parties will need to pass all the usual legal and financial checks and assessments.
Friends buying a property together will usually choose a ‘tenants in common’ arrangement rather than ‘joint tenants’. This means each party owns a specific share of the property. This protects your individual interests but also allows for shares to be allocated according to different financial contributions. If one party can afford to pay more towards the deposit and mortgage repayments, this can be recognised in the share of the property they own. As part of conveyancing (the legal process of buying or selling a property), you should have a declaration of trust put together. This will clearly outline your agreement and your individual shares in the property.
It’s important to note that each party will be responsible for the entire mortgage. Should one of you struggle to afford the mortgage repayments, the other owner(s) will be responsible for making the full repayment. It is therefore important to have honest conversations about finances and affordability before purchasing a property with your friend.
Buying a house with a friend is a big decision. Before you go ahead, you might want to consider these questions:
When you co-own a house with someone, you’re connecting yourself to them financially. How long have you known your friend? Do you trust them? Are they someone you’re happy to connect yourself to legally and financially?
How aligned are your goals and values? Do you have a similar approach to household chores? How tidy are you? Do you have previous experience of living together? Living together can test even the strongest friendships, so it’s important to make sure you’re compatible before buying a property together.
How long do each of you envisage owning a property together? What are your future goals and aspirations? It’s important that your plans align and that you are able to communicate openly if those plans change. This will help to avoid any unnecessary future conflict.
Having a mortgage with someone is a big decision. Each co-owner is responsible for ensuring the full mortgage payment is made each month. Are you able to have open and honest conversations with your friend about finances? Do you know their financial history? How financially responsible are they?
Buying a property with a friend will present a range of pros and cons.
If you’re keen to get on the property ladder but you’re not sure whether buying a house with a friend is the right option, there are some alternatives that you could consider.
Shared ownership schemes enable you to buy a share of a property without having to buy with another person. You will pay mortgage repayments on your share and then pay rent on the remaining share.
Shared ownership will mean you get to choose the property you want, decorate it how you want, and live in it how you want. You’ll also have the option to buy a greater share of the property (up to 100%) as and when you can afford to do so.
If you could afford mortgage payments but are struggling to save up a deposit, you might consider one of the new 100% mortgages now on offer. 100% mortgages were largely phased out after the 2008 financial crisis because they’re considered higher risk to both lenders and homeowners, so it isn’t a decision to take lightly, but it could offer an attractive prospect in the right circumstances.
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