Buying with friends can be a great way to get onto the property ladder, especially in today’s market. Combining savings to get a house or flat deposit and shared earning capacity to get a decent mortgage can be appealing. But it is important to look at the legalities of the relationship to ensure both parties are protected going into the purchase but more importantly when it is time to sell.
Buying a property with anyone is a huge commitment and shouldn’t be entered into lightly. Go into the agreement with your eyes open and consider the following before taking this giant step:
- Who is paying the deposit? Ideally you should split the deposit equally. If you put in different amounts, you will need to consider how you will proportionally split the proceeds if and when you come to sell the property.
- Mortgage payments – you will both be responsible for the mortgage payments, and if one person is unable to pay (for example they lose their job) or chooses not to pay for whatever reason, then the other person could be liable to cover the shortfall.
- Bills – you will need to split the household bills, such as electricity and council tax, but it is important to also consider other things such as home improvements or repairs and how you will both finance these.
- Discuss what will happen if one of you wants out – it is not uncommon, especially when young friends buy a property together, for one person to move on and the other want to remain in the property. This may mean that the person staying at the property will have to buy out the equity stake of the person leaving, and, if this is not possible, they will have to sell the property altogether.
Circumstances change and it can get complicated down the line if you are both not on the same page with the same long-term views. It is better to have an uncomfortable conversation now and set things out in black and white rather than later on when things could turn sour.
One way to protect yourself is to get a Cohabitation Agreement. A cohabitation agreement is a legal document between couples (whether in a relationship, friends or even siblings) who are living together, and helps to set out each person’s rights in regards to the property should the relationship break down in the future or should it just be time to go your separate ways. Additionally, it can also help you divide up bills and other responsibilities while you live together.