In This Guide
Apply for a mortgage
Buying at auction
Buying in Scotland
Conveyancing
Find and view
Negotiate
Plan your purchase
Success and failure
Surveys and valuations
To buy or not to buy
1. It begs the question
2. The financial arguments
3. Economic factors
4. Stay where you are!
5. With your partner
6. With your friends
To buy or not to buy
With your friends
Rising property prices throughout the country, especially in the Southeast have meant that many first time buyers are finding themselves priced out of the market. The deposit and monthly payments are simply out of the price range that will allow many people to cover them on their own. But some people are getting round this by not entering into a mortgage single-handed. Buying a property with friends or colleagues is a valid alternative to continuing to spend money on rent with no return on your outlay.
You can own property in partnership with other people in one of two ways:
This is the way you would generally own a property with your partner.
You both have an equal share in the equity of the property and
if you die, ownership passes to the other partner. While there
is nothing stopping more than two people being joint owners of
a home, in practice it is very rare. Most people tend to pass
on their heirlooms to their partner or family and not to their
friends.
This is the route usually adopted when a property is being purchased
mutually. Each partner owns a prearranged portion of the equity
in the home, which is not necessarily an equal amount. Your share
does not automatically pass to the other partners when you die,
but to whoever is specified in your will. This approach is very
much more like a business arrangement, and like any such deal,
is usually governed by some form of legally binding contract.
An added benefit of this is the possibility of inserting all sorts
of clauses into the deal to customise the nature of the relationship
to meet your exact requirements. You should be able to get an
agreement drawn up by a solicitor for under £50.
Find a solicitor in SiteFinder.
The main areas that the contract or agreement will cover are as follows:
1. Ownership structure
- What proportion of the equity in the home is owned by each partner.
- What proportion of the monthly mortgage payment each partner will contribute.
- Whether or not a single partner can obtain an 'order of sale' to force the property to be sold against the wishes of the other partners.
- Whether the other partners have to be offered first refusal if one participant wishes to sell his/her share. If so, the method by which the price is determined is also usually detailed.
3. Running cost apportionment
- How contributions and responsibilities for bills, repairs, insurance and other incidentals will be split.
- What happens in the event that one partner wishes to move out and retain their share of ownership but rent the property to someone else.
The contract should go into a lot of detail to cover almost every foreseeable eventuality. A piece of paper which you all sign may seem like enough, but if you ever get into a dispute you will probably wish you had a full contract.
Finally it is worth pointing out that not all lenders will allow you to borrow money for a tenants-in-common mortgage. Others will consider it a higher risk loan and charge an increased rate of interest to reflect this.
Find mortgage lenders in SiteFinder.
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