With property prices remaining high, you might be considering buying a home or investment property with one or more friends. We take a look at the implications of doing this and the precautions you need to take.
For many young people, saving for a deposit for their first home is a challenge. Without the help of family, it can often seem impossible to make the first step onto the property ladder.
Buying with one or more friends can not only help you purchase your first home, it can also mean that you are able to buy a bigger or better property than you might otherwise be able to afford and that you can secure more favourable mortgage rates.
Joint ownership
When you buy a property jointly, there are two different ways in which you and your co-owners can own the property:
Joint tenants
If you own as joint tenants, then you all own the whole property together, with no-one having a particular share. If one of you should die, the other or others automatically own the property. This means that you cannot leave your share of the property to anyone in your Will. When you sell, the sale proceeds will generally be shared equally between you.
Tenants in common
If you own as tenants in common, you will each own a specified share. For example, you could each own 50% or your shares could be 25% and 75%. Your share in the property will pass under the terms of your Will, should you die. If you do not have a Will, it will pass under the Rules of Intestacy.
If you are buying a property with a friend, then you may feel that owning as tenants in common is more appropriate. It allows you to protect your share and take into account where one party might have contributed more towards the deposit.
Making a legal agreement to protect your interest
You should put a formal legal agreement in place setting out what you have agreed with your co-owner or owners. This can include details of how much each of you will contribute towards the mortgage, how other bills and maintenance costs will be split and what will happen if one of you wants to sell.
This should also include whether one party can buy out the other, how the value of the property will be agreed upon and in what circumstances the property can be sold.
By talking through and agreeing the details beforehand, you stand a better chance of avoiding misunderstandings and disputes in the future.
Finding the best mortgage
Some lenders are happy to lend to friends and other individuals who are not related. You can research the market yourself or ask a mortgage broker to help you find the best deal available.
Agreeing the ground rules for sharing a home
As well as the formal legal rules, you should make sure that you both know what is expected of you during the time you live together. As well as the financial issues, you should discuss who will do the chores, how you will share food bills and cooking, who will organise getting maintenance done and rules around quiet time and visitors.
Living together is not always easy, but if you can agree on some solid ground rules, buying a property with someone else can be a good way of getting onto the property ladder if you are not able to afford this by yourself. As well as being cheaper than renting, it will hopefully provide you with a sum of money that you can use in the future when the time comes to move on and buy your own home.
Contact us
If you would like to speak to one of our expert property lawyers, ring us on 0333 305 5189 or email us at info@lpropertylawyers.co.uk
