Over recent years, it has become increasingly difficult to get onto the property ladder. The prices remain out of reach for many millennials, who have become known as ‘Generation Rent’. As a result, the UK has seen an increase in the number of joint ownership properties. Buying a property with a friend might seem like a brilliantly fun and practical idea at first, but there are many considerations and even the closest of friends could find living together a mistake.
Most of the properties bought in the UK fall under the joint tenancy basis. The perfect example is the married couple, who jointly own the property with neither being given a specific share. This works well for marriage, as on the death of one, the property simply transfers to the surviving spouse. When moving in with a friend, it would be important to have a share of the property. This would enable you to name someone for that share to be left to upon the event of your death.
Having a share in a property is therefore known as tenants in common. This process of specific shares is also important for co-owners who have put more into the purchase than the other party, making it fairer as they would own a slightly bigger share.
Buying a house with a friend could see both parties finally gaining the chance to get on the property ladder. The average deposit has risen to approximately twenty thousand, meaning getting on the property ladder has become virtually impossible for many single first-time purchasers. Combining two salaries to save up for a deposit can be a great way to get enough money together for a property.
It’s important to be up front about finances, which some people find hard. Not being up front could create issues further down the line. Each side must know about the other’s financial situation, including things like credit history before applying for a mortgage. Get help with finding Conveyancing Solicitors London with a site like Sam Conveyancing, putting you in touch with trustworthy Conveyancing Solicitors London.
Budgeting is vital for anyone planning to buy a house, not only first-time buyers. It’s therefore essential that each party is clear about how much they can contribute to the purchase and a maximum price that can be afforded based on the two incomes.
Most lenders will accept up to 4 names on a mortgage application but generally only take the top two earners’ salaries into account when carrying out affordability tests.
What is one party wants out?
Having a tenants in common set up is helpful as if one party wants out, it is possible to sell, remortgage or gift one share of the property. Joint ownership isn’t as straightforward as the agreement of the other party would have to be sought.
Before going ahead with buying with friends, it’s essential to talk about this scenario. Remember that even the best of friends can have their relationship challenged when money is involved. A good idea is to speak to a solicitor about drawing up a Cohabitation Agreement.