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Mortgages

Buying your first home with family or friends

With house prices still booming, it can be hard to find a home you can afford, especially if you’re buying on your own. But just because your salary won’t stretch to cover the mortgage on your dream home doesn’t mean it’s out of reach. Clubbing together with family or friends could be the solution to getting that first leg up on the property ladder.

Here’s what you need to think about if you’re considering buying your first home with family or friends.

Buying with a guarantor

Some buyers choose to buy with a guarantor; usually their parents but it can be anyone who’s willing to offer a second level of financial security on your mortgage. Buying with a guarantor usually means you can borrow more as a single applicant and often gives you access to more mortgage deals.

It’s a big commitment, for both you and your guarantor. If you don’t keep up your mortgage payments, they’re jointly responsible, so make sure you do your sums carefully before you apply to the Bank of Mum and Dad. They’ll also need to show they’ve taken the necessary financial advice and are aware of the risks before they sign on the dotted line.

Buying with a guarantor doesn’t have to be a long-term commitment though. If you find you can afford the property on your own a couple of years down the line, you can always remortgage to buy them out.

Clubbing together with friends

If you’re planning on buying with friends, it’s really important to talk over all your options together, and to get solid legal advice. You may be committed to the arrangement now, but you need to think about what happens if and when your circumstances change. Say one of you gets a new job and moves away, will you sell up completely, can one of you buy the other out or would you bring in a tenant to cover half of the mortgage?

Have the difficult conversations now so it doesn’t come to a head further down the line and make sure you get your solicitor to record everything to avoid pricey legal wrangles later.

If you’re buying a home with friends, it’s likely you’ll be ‘tenants in common’ – a legal term that means you can choose who owns what percentage of the property and that your friend won’t automatically inherit your share if you die. You might have heard the term ‘joint tenants’, but this is generally for people who are married or in a long-term relationship. Generally joint tenants own an equal share and automatically inherit the other person’s share should the worst happen.

Buying with a partner you’re not married to

When you’re planning to be in it for the long term, buying a house often comes before you’ve got the wedding booked. But just as if you’re planning on buying with friends, you need to have a grown-up conversation about the finer details when you’re buying a house with someone you’re in a relationship with to ensure you’re both covered, legally and financially. If one of you takes out the mortgage and you split up, the other may not have a legal claim on the property, unless you’ve set out who’s contributed what in a cohabitation agreement, which your solicitor can draw up for you. You need to make sure you choose the right classification for your agreement too; if you’re happy for your other half to inherit the house in the event of your death, make sure you’re joint tenants.

If you’d prefer to set out what should happen to your share in a will, you can be tenants in common, but always get good legal advice before you decide.

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