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Buying a House with Friends or Family

Phi Spencer

By Phil Spencer

Like with any form of investment, there are pros and cons associated with buying property. None more so than when you’re thinking about buying a house with friends or family. Here’s some vital information and considerations to make when considering buying with friends or family.

Considerations to make when buying with friends or family

In the current climate, where you’re expected to have a deposit of 10% (or higher), it can be difficult to get your foot on the property ladder. This is why buying with others is an option often explored if a person can’t afford to go at it alone

Here are some of the key considerations you’ll need to make if you’re approaching property buying in this way.

Make appropriate prior arrangements

Always ensure you have appropriate arrangements set up through a solicitor before any money changes hands. Cover yourself from the start by drawing up a declaration of trust. Also decide how you want to hold the property, either Joint Tenants or Tenants in common – be aware, both come with pros and cons so ensure you seek legal advice.

Align future expectations

Make sure you’re singing from the same hymn sheet when it comes to future expectations for the property. This includes an idea of when you intend to sell it, how you’ll add value and crucially, what happens if one person wants to sell but the other doesn’t.

Trust is important

You need to be able to trust the person you’re buying the property with. If you have any worries, concerns or ‘dodgy’ feelings, you should be prepared to walk away. It’s usually better to regret something you didn’t do than regretting something you did.

Pros and cons of buying with friends or family

There are some clear pros and cons which come with buying a house with family and friends. These aren’t reasons why you should or shouldn’t buy property, instead they’re points which need to be addressed before you sign along the dotted line.

Advantages of buying with family or friends

The biggest advantage of buying this way is down to the money

  • You don’t need to cough up 10% deposit, you’ll only need to pay half each
  • Buying costs are halved e.g. mortgage fees, legal fees, stamp duty
  • Monthly mortgage payments are cut in half
  • If you can pay more, you can look for a larger property together
  • Household bills and running costs are halved too

Disadvantages of buying with family or friends

  • It will be more costly having a solicitor draw up additional legal documents, to make sure you are both protected in the event of anything going wrong. This is vital and you will have to factor these additional costs into your anticipated budget
  • When it comes to property there are any number of things you can fall out over. The most common reason for a disagreement is when one person wants to sell and the other doesn’t. Ensure you talk through what you would do if this happens. Get this written down and signed. Make sure you’re both aware of the potential impact on your relationship, if you can’t reach an agreement
  • You could be responsible for the full mortgage if the other person defaults

If you're buying a house, ensure you understand your finances and know what you really can afford. We have experienced advisers who can help - get started here.

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