Q. I have been thinking about buying a property for ages now but it always comes down to the same thing – lack of funds. However a very good friend of mine is in exactly the same predicament and we have recently come to the conclusion that it might be an idea to buy ‘together’. First of all do you think this is a good idea and secondly what are the pitfalls of entering into such a big commitment with another party?
A. I am with you on this one. First time buyers like you struggling to raise large deposits or secure finance from reluctant banks should definitely consider buying with a friend as a potential solution to help spread the costs of buying a home. But with a property likely to be the biggest purchase of a lifetime, it is important for anyone considering a joint ownership arrangement to get it right from the start.
Splitting the cost of a substantial deposit, maintenance and mortgage repayments could make owning a home a more obtainable for many would-be first time buyers. However, it is advisable to anyone looking to enter into joint ownership that a transparent relationship between all parties is imperative if the process is to go smoothly. That is a vital step whether you are buying with family, friends or another third party.
Consider your mortgage options. There are mortgages that exist specifically for this type of purchase, so shop around for the best deal. Remember that, with a combined income, it may be possible to attain a mortgage of higher value, giving you greater choice of properties. You will need to carefully consider things and think about the worst case scenario, one of the benefits of buying with friends or family should be a high level of trust, but that shouldn’t be to the detriment of legalities.
Consult your solicitor to discuss a legally binding co-ownership contract and agree in advance what will happen if one owner’s circumstances change. Remember, this is a business transaction, and any documents relating to the property or mortgage must be in the names of both buyers. Ensure copies are made of all documents associated with the purchase to allow them to be easily accessible to both parties.
Don’t forget to arrange for an inventory or comprehensive list to be made of non-shared items or other costs, and keeping a note of who pays for things like decorating materials at the start of the shared ownership can reduce confusion months or years down the line. Set a realistic timeframe, if you are buying with a friend it is likely that the relationship is ultimately going to be temporary.
For this reason, co-ownership should always be treated as an investment decision and buying a property with a good potential resale value makes sound business sense, and will ensure that you are both able to walk away with a decent deposit for your next purchase when you decide it’s time to sell up and go your separate ways.