As property prices continue to rise, buyers are finding smarter ways to get onto the property ladder. Sharing a mortgage with friends or family is a viable option for many buyers, and it’s gaining popularity amongst first-home buyers who may be struggling to enter the property market. Could it be the right option for you?
Set a good foundation
More and more today we’re hearing about friends or family members pooling resources to buy a home or investment property. While combining resources makes perfect sense for buyers who may be struggling to raise a deposit or who don’t meet the income requirements, it’s important to set a good foundation to avoid disputes further down the line.
Property sharing agreement
Before you sign on the dotted line, it’s a good idea to have your solicitor draw up a property sharing agreement or a co-ownership agreement that outlines the important details like what happens when one of you decides to sell, how much share each person has, and what costs you’re each liable for.
As well as sharing the up-front cost of buying a property – securing finance, deposit and any taxes - when you buy a property with friends or family you share the responsibilities that go along with owning your own property – so the ongoing bills, repairs and maintenance, insurance costs and any other financial commitments are shared. These should be clearly documented and agreed in the property sharing agreement.
Sharing a mortgage successfully depends on being transparent and direct about the important details. That means discussing monthly payments and bills that will need to be paid, setting boundaries and agreeing on responsibilities, and finding the best way to hold each other accountable.
The legal implications
It’s important you carefully consider the legal implications of co-ownership before making your decision. If all co-owners sign the loan documentation, each is jointly and severally liable for each other’s debt. So, if one of the friends or family fails to meet their loan repayments, you could end up having to cover their shortfall.
A fall out amongst family or friends is all too common and can make shared property agreements quite messy. Ultimately, buying property with family or friends is a business arrangement and it’s important not to allow personal issues to get in the way of this. Consider buying property with like-minded people who have similar goals to you. Make sure they’re in a good financial position to meet their share of repayments and financial responsibilities.
Find out more
If you think buying a property with family or friends is an option that would work for you, talk to a Mortgage Express mortgage adviser for advice on the finance options available to you.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
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