If you’re looking to realise your home ownership dreams sooner rather than later, but haven’t quite got the funds together to buy and/or run a house alone yet, then purchasing a house with a friend or family member can be an excellent idea.
Whether it’s you and a friend splitting your mortgage payments and utility bills, or Mum and Dad releasing equity from their own home to provide you with a deposit, it’s an increasingly popular way to get a leg on the property ladder. There are certainly several things to consider before you take the plunge though, and it may not be suited to everyone’s circumstances or plans for the future.
In this guide, we’ll tell you what you need to know about buying a home with friends or family, to help you determine whether this could be the right option for you.
What are the benefits of buying a home with family or friends?
- You’ll be able to raise your deposit much sooner. This could because you and a friend have each been able to save from your separate salaries, or if you and your family had opted for something like a Post Office Family Link™ mortgage. This allows a first time buyer, who has a close family member that owns their home outright, to use a small mortgage on the family home to fund a deposit on their own.
- You’ll be able to take advantage of other joint and co-ownership mortgage products, of which there are more and more coming to market all the time. With your higher combined income, you may even find mortgage lenders view two friends favourably.
- If you move in with a friend or family member, and you’re both named on the mortgage, you’ll be able to share the cost of your mortgage payments.
- You’ll also be able to split things like council tax, insurance, utility bills, repair fees and maintenance costs – this could even free up some budget to fully renovate the home if that’s part of your plan.
- If you’re considering living together, we’d like to think that you’ll enjoy and make the most of each other’s company!
Things to think about when buying a property with friends or family
As with anything, there are some disadvantages of buying with family and friends. But by being well-informed and responsible, you can overcome and manage most of these. Here are a few of our top tips and recommendations.
- Changing circumstances. You might be confident of your own situation, but when you buy with someone else, you’ll have to consider theirs too. One of you could encounter problems, which would impact the other. Make sure you have an open and honest conversation about each of your personal circumstances, and have a plan in place for what you would do should the other party’s change.
- Formal agreements. Buying with a friend or family member can be a little more bureaucratic than going it alone, and each party will want to keep all the individual statements and records of transactions they can. A great way of tidying this side of things up is to have your conveyancing solicitor draw up a legally binding cohabitation agreement, that you would both then sign. This would cover thinks like, amongst others:
- The share of the property each party owns.
- Financial responsibilities and contributions of each party.
- A process for resolving any disputes that could arise.
- How maintenance costs should be shared and managed.
Doing this is an excellent way to protect the investment you’ve each made, and will provide piece of mind.
- Moving out. Problems can occur where you want to sell and the other person doesn’t. One workaround is that you could consider renting out your room at the house to cover your mortgage payments once you move elsewhere. Alternatively, one party could buy out the other’s share in the property through a remortgage. If you want to ensure there’s a clear process to follow if this scenario does arise, you could include a section about it in the cohabitation agreement.
- Managing money. If you keep your finances totally separated, it can be tough to track who’s contributed and covered what money-wise. A great way around this is to set up a joint bank account that you’ll both have full access to. You can have all your mortgage payments and bills come out of here, while you could also agree conditions under which money from the account can be used, for things like repairs and new furniture. Doing this will make it much easier to understand what’s been coming in and going out between the two of you.
- Mortgage responsibilities. Where you’re both named on the mortgage, your equally liable for paying your installments. That means that, if the other party doesn’t pay, you’d need to make up the difference yourself. You can’t get around being liable, so the best advice is to only choose to buy with someone you know well and trust. If they’re someone important to you, this shouldn’t be a concern.
- Personal possessions. It’s a good idea to make an inventory of items that belong to each of you before you move in. It’s easy to lose track of who own’s what, particularly after several years, and it’ll make things much easier when one or both of you decides it’s time to move on. Remember to sporadically add any new items to your inventory, as well as listing anything you buy for which the cost is shared.
- Inheritance. Buying a house with friends and family can complicate things slightly where inheritance and financial support in the event of a death are concerned. This can be resolved simply by ensuring you each have a life insurance policy, as well as a will and testament in place.
- Living in harmony. It’s always good to have a few house rules. You both own the home and you’re entitled to enjoy it as you please – but having some lenient structures and boundaries in place before you move in will benefit both of you. Remember to discuss things like pets, family members staying over and noise levels. Successfully living together only requires a little compromise and lots of communication.
By following all the right steps, buying a house with a friend or family member can be an enjoyable and financially rewarding experience. Whether you think it’s the right choice for you, or you’d rather wait and go it alone, you’ll need to consider a mortgage as soon as you begin your search. To get an idea of how much Post Office could lend you, take a look at our handy mortgage calculator.