Online House Hunter: Sharing ownership
FIRST-TIME buyers are finding unusual ways to get on to the property ladder including buying a home with friends or family. At first glance it appears to make perfect sense but the National Association of Estate Agents is warning first-timers to go in with both eyes wide open.
The advantages are reasonably clear: sharing the mortgage and maintenance costs, sharing the initial costs in buying a home – plus the chance to have a potential baby-sitter just a room or two away. But the disadvantages need some careful thought as well: what happens if the friendship or family ties break down? What if one person defaults on payment? And who mediates in rows over sharing bills?
Peter Bolton King, chief executive of the NAEA, said of joint ownership, “At a time when a lack of mortgage finance is hindering first time buyers, opting to buy with a friend or relative can represent a sensible way of getting into the market.”
“Twice the number of bedrooms doesn’t always mean twice the cost, so sharing the price of a home, and the deposit – as well as bills and maintenance costs – can make real financial sense. Importantly, both owners don’t necessarily need to live in the property – a person living in London could invest in a town with lower house prices with a friend who lives there, and rent out the second bedroom.”
“However, for anyone considering entering into a joint ownership I would stress the importance of a transparent, open relationship between all parties involved to ensure a smooth purchase and ownership process. Remember, this may be your home, but it’s also a business transaction and one of the biggest decisions you’ll ever take.”
The NAEA recommends the following:
· Consider the Worst Case Scenario – One of the perks of buying with friends or family should be a high level of trust, but that shouldn’t be to the detriment of legalities. Consult lawyers about a co-ownership contract and agree in advance what will happen if one owner’s circumstances change
· Get the right mortgage – There are mortgages that exist specifically for this type of purchase, so shop around for the best deal. By combining in this way it is possible to attain a mortgage of higher value, due to the increase in income afforded by applying with a joint wage
· Keep paperwork in order– Documents associated with the purchase should remain accessible to both parties. Any documents relating to the property or mortgage should also be in the names of each of the co-buyers
· Count the pennies – Often a joint bank account is the best way to ensure that mortgage/utility payments are met promptly. If all parties have access to the account it also ensures that any financial transactions are handled transparently and are not the sole responsibility of one owner.
- Our online property search engine
- National Association of Estate Agents
- Council of Mortgage Lenders
- Citizens Advice Bureau
- Consumer Direct: Buying A Home
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