Buying With Friends May Not Work Out

Young people, desperate to get onto the property ladder, are pooling resources to try and get a start in home ownership. Brothers, sisters, friends, even strangers are being called upon to boost people’s ability to afford a home. Websites such as c-buywithme.co.uk and gohalves.co.uk are demonstrating the popularity of such schemes, as people join financial forces with people they’ve never met before.

Over 20% of first-time buyers who have not taken out a mortgage with a spouse have taken out a home loan with someone they haven’t known for even as long as a year, says the Skipton Building Society. However, there is a big downside, as the study also shows that a quarter of these liaisons do not work out, leaving at least one party worse off. A major eye-opener was that four out of ten in such a broken deal had not signed an agreement as to how to resolve the situation if it fell apart. The path is not for everyone and one in three borrowers who ended up having to sell said they regretted having bought with the other person.

First-time buyers have been pushed into such drastic measures by high property prices, but they need to protect themselves and their money by drawing up an agreement beforehand.

Even girlfriend-boyfriend relationships break up and the fall-out can be problematical. Who stays? Who goes? Who pays who what? And what happens if neither can afford to pay off the other? There are also extra fees involved in changing a mortgage: early redemption penalties, legal fees, valuation fees etc.

If you are buying with other people, it is a good idea to seek advice from a solicitor. It might seem a bit cold, especially if the buyers are a couple, but it could save a lot of emotional and financial pain if a relationship ends. If you buy property with friends, a solicitor can draw up a ‘tenancy in common’ agreement so each person owns a definite share in the property.

Mortgage payment protection insurance can help if one person is unable to pay part of the loan if they are ill or made redundant.