Buying a house with a friend can be a good way to get onto the property ladder. Securing a mortgage and deposit that’s big enough to cover the type of property you want can be tough when doing it on your own, especially considering the current rises in mortgage rates and cost of living. This can lead to thinking that buying a house with a friend is a good idea, so here we take a look at some of the pros and cons associated with going down this route.
Can you get a mortgage with a friend?
You can get a mortgage with a friend just like you can with any other person, such as a partner or family member. Lenders will take into account both of your credit scores and financial histories, as well as your affordability based on income to judge what size loan you can get. There are certain things to consider when buying a house with friends though.
Benefits of buying a house with a friend
As a first time buyer, it can be easier to get on the property ladder when you buy a house with a friend, rather than trying to secure a mortgage on your own. As long as you both have reasonable credit scores, your combined earnings will mean you’re able to take out a bigger loan to secure the property you want. Read our guide on how to boost your credit score.
Those financial benefits stretch to both your initial and ongoing expenses, including the costs associated with buying a house, followed by bills, maintenance and repairs once you complete your purchase. From mortgage and legal fees to council tax, utilities and internet costs, you’ll split these types of things two or more ways and make significant savings compared to if it was only you paying out.
You’ll also make money if the value of your home increases, as your mortgage payments hopefully allow you build up your equity in the property This will give you a return on your investment when you come to sell, as opposed to renting where you leave with nothing to show for the money you’ve put into someone else’s property.
What are the complications of buying a house with a friend?
Whether it’s a new partner, job or desire to move abroad, changing circumstances can often cause issues between friends who buy a house together. Fallings out are hardly uncommon either, especially between people who are living under the same roof for the first time.
It’s much harder for one of you to move out compared to if you were renting, and a change in circumstances can mean you have to put your house up for sale. This can take months, while if one of you wants to leave but the other doesn’t, you’ll need a new mortgage as well as plenty of cash to buy out the other party.
Many friendships are less of a partnership than those between boyfriends, girlfriends, husbands and wives. While you may share a bank account and/or finances with a partner, you probably won’t with a friend. This could become a real problem if they default on mortgage payments or stop paying bills you thought they were otherwise taking care of, although opening a joint bank account can be a good idea.
What should I do before buying a house with a friend?
It can be a tough thing to judge, but you need to ensure you’re going into a house purchase with someone who you not only trust, but who’s going to be financially reliable. This is to protect yourself from adversely affecting your own financial landscape, with respect to things like your credit score. You need to remember that both of your names will be on the mortgage, and their actions will have an effect on you.
It could be a good idea to try renting together first. As well as getting a good indication of how you’ll get on living together, you’ll also gain an insight as to whether your friend is going to be financially responsible enough. Regardless of whether you rent first or not, it’s crucial to do your homework as best you can to try and prevent potential issues. As well as checking both of your credit scores and comparing your income and assets prior to application, you should get a comprehensive cohabitation agreement drawn up, setting out the terms of your house purchase in a legal contract.
If you’re buying a house with a friend, co-habitation agreements are a standard practice, and nothing to feel embarrassed about. A lawyer will help to set out exactly what share of the property you each own, how much money you’re contributing to the deposit and mortgage, and who’s responsible for the costs associated with any maintenance issues. You can also determine what happens to the property if one of you dies, as well as whether rooms can be rented out and the process involved if one of you wants to sell.
How to get a mortgage when buying a house with a friend
The mortgage process for buying a house with friends works in exactly the same way as if you were getting a joint mortgage with anyone else. Financial backgrounds, income and commitments to things like car loans or children are scrutinised to determine your affordability, with each party on the mortgage responsible for making payments upon approval. It’s possible to pay unequal amounts on your monthly mortgage payment, while putting different amounts of money in for the deposit won’t have any impact on the mortgage you can get.
What kind of property should I buy with a friend?
While your personal tastes and preferences will of course come into play with respect to location and style of property, it’s a smart idea to buy a property that’s likely to sell quickly should it be placed back on the market. There are no guarantees with property, but a well-maintained house or flat in a desirable location that requires little renovation or repair, is much more likely to sell quicker than a fixer-upper in an area where there’s a slow property market. Look out for properties with large kitchen or living areas and flats in popular areas, which could help you secure a quick sale if you or your friend’s changing circumstances necessitate one.
If you’ve decided that buying a house with a friend is the right thing for you to do, download our step-by-step conveyancing guide and get the low-down on what happens once you have an offer accepted on a property.