Your complete guide to buying a house with friends
Purchasing property is a distant dream for many Brits, so splitting the responsibility and buying a house with a friend has become an attractive proposition. In this article, we’ve explored the things to remember when you buy a house with friend, the ways you might want to structure ownership, the benefits and drawbacks, and our top tips.
Can I buy a house with a friend?
Just as cohabiting couples have become commonplace, buying a house with a friend is entirely feasible, and in the majority of cases, a great success. But it’s important to consider the following:
- Communication: being able to communicate is imperative, as you explore the property market and look for a home you both like. Whether you need to be based within walking distance of work, you’d like to be situated near the city or transport routes, or you need an area that’s pet friendly, it’s important to be able to comfortably vocalise concerns and issues.
- Financial honesty: being upfront with your finances should be one of your main priorities. Buying a house with a friend is an incredible responsibility, so make sure you’re both aware of what each party can reasonably afford, both in terms of a deposit and regular mortgage payments.
- Realistic expectations: when buying a home with a friend, it’s important to have a realistic idea of what you can and can’t afford. Compare mortgage providers to try and get the best possible deal, but know what kind of price range you fall under; there’s no point looking at houses for £200,000 if a provider will only offer £150,000.
Joint tenants or tenants in common: which is best when buying a house with friends?
Whether you’re looking at a new build, maisonette, or city centre apartment, when buying a house with friends it’s important to consider ownership structure. This refers to the steps you need to take if one of you chooses to sell in the future. There are two core types of co-ownership:
Joint tenancy: under a joint tenancy agreement, you both equally own the whole property. This means any sale or re-mortgaging of the home needs to be agreed upon by all tenants.
Tenants in common: if you are a tenant in common, you only own a partial share of a property alongside your friend, rather than an equal share of the entire home. This means you can individually sell, give away, or re-mortgage all or part of your shares without needing to obtain any permissions.
Because a tenants in common agreement offers more flexibility for each party, it is the most often followed route for friends buying together.
What are the advantages of buying a house with friends?
Buying property has become increasingly difficult for some people, and there are many who simply won’t be able to save a large enough deposit and demonstrate the ability to make mortgage payments on their own. This is where buying a house with friends can prove to be a helpful option:
- It’s typically easier to qualify for a mortgage when applying as a pair or group. This makes stepping onto the property ladder more accessible.
- Your deposit, mortgage, and bills are more affordable.
- Unlike renting together, buying a home with a friend allows you to invest and build equity and generate profit.
- Buying a property with a friend needn’t mean you have to live there. You can rent out the home to tenants, to provide an alternative source of income without having to fork out for a full mortgage each.
Are there any drawbacks to buying a house with a friend?
While choosing to buy a house with friends is advantageous in many respects, there are two potential drawbacks you should be aware of:
- If you or your friend’s financial circumstances change, you might find it difficult to continue making mortgage payments or split bills as previously arranged. This can put a strain on the friend who is required to pick up the slack.
- Even if you’re tenants in common, there’s no ‘easy’ way out if you realise you’re not compatible co-owners, and you’ll still need to go through the sales process. If you’re in this predicament, consider a quick house sale through a cash property buyer.
However, although these might, upon first glance, appear to be quite difficult obstacles to overcome, they are easily managed through sufficient planning and open communication.
Top tips when buying a house with friends
1. Get organised
Buying a house with a friend can be a minefield of paperwork, with various documents floating about. This can become overwhelming, especially if you’re both first time buyers. As such, organisation should be right at the top of your priority list.
Additionally, it’s a great idea to open a joint bank account to make mortgage payments from; you can each pay into it and keep your personal finances totally separate.
2. Check credit reports
Choosing to buy a house with a friend is a financial commitment, so it’s important to ensure each party is aware of their credit score and how it might affect any mortgage agreement. There are various free platforms online that offer a comprehensive report.
3. Establish house rules
When you buy a home with a friend, it’s important to set boundaries and house rules, to ensure you both get the most out of the experience. With a few house rules in place, the move has the potential to offer great mutual financial and practical benefit.
4. Consider renting together first
If you and your friend have never lived together, it could be a sensible idea to spend some time renting with each other first – if only for a short period. This allows you to iron out any doubts you might have about each other’s habits and personalities, and gives you the chance to pull out before you’ve made any serious financial commitment.
5. Keep an inventory
When buying a house with a friend, you’ll each bring various personal belongings with you. While you might be happy to share when living together, you’ll likely want to reclaim what’s yours when one of you moves out. This is made straightforward with a simple inventory, that outlines, for instance, who brought the sofa, who owns the TV, and who paid for the microwave.
Buying a house with friends is an exciting time, and can help you to get on the property ladder that little bit quicker – but it’s important to be prepared. For even more helpful property guidance or industry advice, check out our blog.