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Home > Home Buying Tips > Buying a House with a Friend – A New Trend in Property Purchasing

Buying a House with a Friend A New Trend in Property Purchasing


These days' house prices are still substantially higher than your average wage and overall it's much cheaper to rent instead of going all out and taking a risk on an already precarious housing market. It's even worse for the unmarried buyers out there, whose chances of obtaining a loan from the bank is pretty slim, especially in our current economic situation and with new rules on mortgages complicating things even further. But it's not all hopeless; groups of single unhitched friends who having spent most of their lives renting in shared apartments are now banding together to pool their resources and buy their dream homes.

The benefit of joining forces is that with a combined income you're more likely to qualify for a larger loan, so getting a place that you really want instead of settling for that other one becomes a real possibility. We all know that purchasing a home is a big decision that comes with a lot of responsibility, keeping up mortgage payments, constant repairs and endless bills; all of these things add up, but with another person their for support a lot of pressure will be taken off your back. Though despite these positive benefits, owning a home with even the closest of friends can turn into a messy legal battle, which may end in one side losing their half of the property and even worse the loss of a dear friend.

Who do I share with?

If you are able to, the best scenario would be to share the cost of a new house with a sibling, as it would make the legal documentation regarding what belongs to who a much simpler process. But we're talking about sharing with friends here, so the next best thing would be to find someone that you have spent a long time living with, a person whose habits you know well, that is reliable and is a man or woman that you can trust.
Besides their positive personal traits it's always best to find some one with a high credit score, this might sound shallow, but in reality finance companies and banks will be looking to scrutinize the smallest notches on your record.

Plan for the unexpected

You may feel like you have a very close relationship with your friend, but it is best to lay everything on the table, be open about what you both want and what you expect from the purchase in 10 -20 years time; it's a good idea to plan for several future possibilities. For example, what if one of you decides to get married, will that person be able to sell their share of the property to someone else or will you be able to buy it from them at a fixed cost? How about if one owner passes away? In most cases his or her share is immediately turned over to their family members unless agreed otherwise, there should be no stone left unturned no matter how silly it may seem at first. After sitting down to a long brainstorming session, it is recommended that you seek legal advice from a lawyer who can help add several more possible issues to the list and draft up the relevant paperwork. All of these possibilities can be included in a written agreement, similar to a marriage prenuptial, which requires both parties to understand and accept a number of buying guidelines.

Once you have gone over the worries and come up with plan B's to cover any eventuality, you can think about the type of tenancy agreement you and your friends want on the property. There are two ways for you to buy your chosen dream house, joint tenancy and tenants in common, which one you choose depends on your relationship and how much money you each have.

Joint Tenancy: In this type of agreement all persons involved in the purchase of the home equally own all of the property as a whole and not just a particular share of it. In the event of one person's death, their half will immediately go to the other person and they will become the sole owner of the property.

Tenancy in common: In this form of ownership both parties have a specific share of the house, which may be equal or not; for example both parties may own 50% of the property or one may own slightly more depending on how much money they initially put into it. The difference with this type of ownership is that when one person passes away their part of the property is automatically handed over to their family who then become the rightful owners.

The main concern is what happens if your friend is no longer able to pay mortgage payments on their half of the home, will you become liable for this or is there an option to buy it from them at a certain price? The property agreement will stipulate in writing exactly who the property belongs to and what each person is paying towards the mortgage, hold on to this vital piece of paper in case of issues further down the line.


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