Buying a home with someone else. Sounds simple, right?
You fall in love with a property, combine your savings together and split the cost 50/50.
If only it were as easy as that!
In fact, there’s a lot to consider and plenty of legal jargon to get your head around. Particularly if this is your first step onto the property ladder, it can be tougher than it sounds.
Here’s a quick guide to first time home buyer joint ownership.
Joint tenants vs. tenants in common
Decided to buy a property together? This is most commonly chosen by married or unmarried couples, however friends can also choose this route. It’s tougher for single first time buyers, therefore buying with someone else is an attractive option.
There are two different ways people can go about this.
Here’s an overview of this type of home ownership:
- Parties receive an equal share of the whole property
- If one person dies, the property automatically transfers to the other owner(s)
- You cannot leave a share of the property in your will
- When sold, the proceeds will be split 50/50
- Any income generated by renting the property out is also split evenly
Tenants in common
This type of ownership differs slightly, therefore it’s vital you get your head around the two so you know what you’re getting.
- You can own different shares e.g. 60/40 of a property (can be equal but doesn’t have to be)
- You can pass on your share in your will – it doesn’t automatically pass on to another owner (unless in some cases of marriage)
- Sale proceeds can be split equally or unequally
Both types of joint ownership apply to both leasehold and freehold properties.
Can you change?
You can change from from being joint tenants to tenants in common (or vice versa).
Situations include divorce, separation or marriage. You may want to have legal rights to more or less of the property.
Nothing is set in stone – tenants in common can give you more flexibility in the case of a divorce, for example.
There isn’t a fee involved with changing, however both parties need to be in agreement.
How does this affect stamp duty?
First time buyers only pay stamp duty land tax on properties worth over £125,001. However, if buying with someone else, it must be both parties first home in order to qualify.
Pros and cons of joint ownership
It’s essential to understand everything about the types of home ownership and work out what’s best for your situation.
There are also some inevitable pros and cons to weigh up before you make any final decisions.
Owning a home, particularly in a city such as London, can be incredibly difficult on one income. There’s not just the initial costs to think about, but ongoing ones such as bills and maintenance.
Having someone else financially responsible can be hugely beneficial, ensuring the property doesn’t become a burden.
It can also help you get on the property ladder more quickly. Saving for a deposit on two salaries is far easier – and it will open up a wider range of mortgage options. If you’re looking to own a home sooner rather than later, joint ownership might be the easier path.
Owning a property with someone else – particularly if a smaller share – means you can’t make any decisions entirely alone. This covers a range of areas, such as decorating and renting it out. If you were the sole owner, every decision you made would be yours and yours alone.
Divorce or separation can make joint ownership complicated, particularly if things don’t end amicably. If you owned the property yourself, you wouldn’t have to worry about this.
Mortgage lenders are often willing to agree to a bigger loan if you’re buying a house with someone else. This is partly why it can be a struggle for hopeful homeowners to go at it alone.
Everyone named on the mortgage is responsible for the monthly repayments. It’s open to:
- Couples (unmarried, married or civil partnership)
- Friends and family members who want to live together
- Business partners looking to invest in residential property
There are always risks involved, but you may be able to snap up some of the more attractive mortgage deals. A lender’s top priority will be to safeguard their loan – so the more of you, the better.
Getting your head around first time buyer mortgages is key – as it’s likely you won’t be owning a property without one. Always speak to an adviser to understand your options and what’s available to you. We can connect you with one and provide you with free mortgage quotes to help you take that necessary step – get yours below.
Shared Ownership mortgage
The Shared Ownership scheme is one example of the government helping you to buy a home. It sits alongside the Help to Buy ISA as a way many hopeful homeowners have got their foot onto the property ladder.
Essentially, you own a share of the property (between 25%-75%) and pay reduced rent on the other share.
If you can afford to keep up with the monthly payments, it might be worth owning more of the property. However, if you can’t, it can be a cheap way to take that first step to home ownership.
Seek legal advice
You’ll need an experienced solicitor to help you through the property minefield and deal with all the important processes.
We can help to connect you with a licensed professional. Get conveyancing quotes for free below.