Buying a home can be a struggle with mortgage rates and house prices remaining high, and so for some house hunters it could make sense to club together with a friend or a co-habiting partner.
But while this may solve some cost issues, there are also some vital considerations when buying a home with someone else.
Ben Thompson, deputy CEO, Mortgage Advice Bureau, explains that, when it comes to mortgages, there may be some downsides as well as positives to think about.
On the upside, he says: “The benefits of having a buying partner doesn’t just come from having deeper pockets for your deposit. It also gives you the chance of securing a joint mortgage, allowing you to borrow more together, so you can secure a larger and perhaps more suitable place to live.”
But he cautions: “There are potential downsides to a joint mortgage. For instance, a friend’s poor credit could impact your ability to borrow.
“It’s also important to remember if their financial situation worsens after moving in, you’ll both be equally responsible for payments. This could be challenging if they struggle to pay their share.
“It’s crucial to trust your partner and feel confident in their reliability.”
He suggests consulting with a mortgage expert to fully understand the implications and risks.
Thompson also highlights the different types of property ownership that people may consider when buying a home together, adding: “Joint mortgages and joint ownership aren’t always the same.”
Buyers could, for example, have a joint tenancy, where both people have equal rights to the property, he says.
Or they could have an agreement which allows each person to hold a different share of the property.
In other cases, people may choose to buy with the help of a family member, but the ownership of the home is solely theirs.
Thompson adds: “It’s important to consider what type of ownership is best for you, and speaking with a mortgage adviser should help you decide what the most suitable option is.
“An adviser will help you to get mortgage ready, taking into full consideration your future plans and priorities, as well as your current affordability.”
There also may be a time when one person wants to buy the other out, which could be a natural next step if friends have bought together and one of them wants to move on.
Thompson says: “When buying with friends, it’s not like moving in as a married couple who have certain rights when it comes to sharing a home. Instead, those buying together need to be proactive and honest about the arrangement.
“One way you can protect your rights is by getting a cohabitation agreement. The agreement outlines how you and your friend organise your finances and property while living together, and what the protocol will be in the case of plans changing, falling out, or unforeseen circumstances.”
Thompson adds that while the agreement may seem pessimistic – “you must not overlook the importance of protecting your respective interests and futures.”
