Are two bank accounts better than one?
The price of property today has excluded many from taking the first step towards ownership. If you’re not a couple then you may find that, on its own, your salary may not be enough to convince a mortgage lender to give you what you need to make the purchase. So, what can you do? One solution is to buy a home with a friend – this is increasingly the answer to the problem of unaffordable housing for many people.
The benefits of buying a home with a friend
- Sharing the costs. If you’re buying alone then all the costs of the purchase will fall to you, from paying any taxes due through to the cost of getting documents executed. When you’re buying with a friend then you can split these right down the middle, 50:50.
- A bigger deposit. Pooling your resources with a friend will mean you get to the required deposit amount more quickly. Today, the bigger the deposit, the better the deal you’re likely to get on a mortgage. If there are two of you putting cash into the deposit then you could get to 20% or 30% of the purchase price and get a cheaper mortgage as a result.
- Sharing the mortgage payments. When you’re sharing ownership of a home you’re also splitting the mortgage payments. So, your monthly outgoings will be much lower than they would be if you were covering the mortgage payments from your salary alone. In addition to that you could potentially borrow more by using two separate guarantors to borrow via a according to the personal finance experts at .
- Getting to the point of purchase in the first place. Buying may simply be out of the question for you if you’re alone and don’t have the resources to do it.
The disadvantages of buying a home with a friend
- You have to work out how to share the costs. This can become complicated if one person has more resources than the other. So, for example, if you’re putting in a bigger share of the deposit. You’ll need to ensure that you have a fair agreement in terms of who gets what based on what they have paid.
- Shared ownership. The idea of shared ownership is great until there is an issue. For example, you fall out as friends or one person wants their other half to move in. Shared ownership can create a lot of problems if you don’t have a clear idea of how to resolve your situation in advance.
- Selling can end up being complex. What happens if you’ve both paid a different proportion of the mortgage and added different amounts to the deposit – how do you then divide up any increase in the property sale value when the time comes to move on?
If you’re looking into buying a property with a friend, the most crucial factor is going to be establishing, in clear terms, who owns what and how any changes to your relationship are to be managed. If you anticipate this in advance, and agree in writing how it will be handled, then you can minimise any potential problems up front.