Buy with a Friend to Make your Money go Further

FTB2In the second of our series about aspects of buying a property for the first time, here we consider the issue of buying with a friend.

When buying for the first time, affordability is inevitably a concern. Many people find that this can be overcome by purchasing with someone else. This certainly makes the money go further and also spreads both costs and risk.

However, no matter how well you get on with your co-owner, if one of you can’t meet your obligations, it could fall upon the other to cover any shortfall. You must also consider what you’d do if either of you couldn’t work due to illness, lost their job, wanted to move out, or died. So do insist that your partner takes out adequate insurance to cover these eventualities.

It’s also worth asking a solicitor about the various types of shared ownership options. For example “Tenants in Common” and “Joint Tenants” are subtly different forms of ownership, but each has significant implications. (NB: The term “tenant” here does not mean you are renting!).

In essence, “Tenants in Common” means that both of you are each individually responsible for 100% of the liabilities of the property, but which you agree to share for practical purposes. But if your partner defaults, then you could be held liable for 100% of their debt as well as your own. “Joint Tenants” means generally means that you are only responsible for your portion of the liabilities, not theirs.

A joint purchase does not have to be on equal terms. It may be that one party contributes say 70% of the money or mortgage, and the other 30%. In this instance it would not be unreasonable to split all outgoings proportionately, as well as any equity share (known as equitable interest) when the property is eventually sold.

As in many property matters, where there’s a will, there’s a way, and please feel free to contact us for further assistance.

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