With more and more people struggling to get onto the property ladder it is very common today for friends or partners to buy a property together. Combining your savings to get a deposit is quicker to achieve when two people are putting money into the pot. However it is very often the case that both parties will have different amounts to bring to the table. One party may have already owned a property or have been gifted funds and therefore will find it easier to get money together for the deposit.
Likewise if you are buying a property together you will need a joint mortgage. Remember that if one person fails to pay then the other person will be liable to cover the shortfall, so it is important to understand what you are getting into, and with whom.
If you are buying a property with a friend we would recommend that you think of your exit strategy and enter into an Agreement at the very beginning, regulating how the sale proceeds will be split when the property is eventually sold. For example:
1.Mortgage loan is paid off
2.Sales expenses are paid
3.Person A would receive £X and Person B would receive £Y (the amount of deposit they put into the purchase)
4.The balance of the monies would then be split 50/50.
This is only one simple example of how funds can be disbursed following a sale. Circumstances change and this is even more important if you are buying with a friend. What if one of you wants out? Or one of you loses your job while there are mortgage payments to be made? Friendships change and lives develop at different times meaning it is quite common for one person to want to come out of the property agreement at an earlier stage than the other, and therefore an option to consider would be for one party to buy out the other party.
Buying a property with someone is a huge investment and shouldn’t be entered into lightly. The financial benefits of having someone else help with the deposit and split the mortgage tends to be the key driver for the majority of cohabitants. However circumstances change and it is always easier to have the conversation at the start of the property buying relationship rather than when things might be awkward later on. Always take advice from a solicitor at the beginning and put a Cohabitation Agreement in place to safeguard your investment for the future.