The Guide to Shared Homeownership: Pros and Cons of buying property with Family or Friends

• Posted onJanuary 4, 2024

We know that purchasing a property can be a daunting prospect, especially with the well-publicised rises in interest rates on mortgages. Vicki Dick, a paralegal in the Residential Conveyancing Department, shares what you need to consider before buying a property with family or friends.

Whilst many people share the costs with their spouses, what happens to those who can’t afford to buy alone? People often purchase properties with partners, family members or friends. Here are some of the pros and cons WSP Solicitors have identified when buying a property with a family member or friend.

Pros of buying a property with a friend:

• You’ll be able to raise the funds for the deposit much quicker as you can save money based on two separate salaries.
• You can share the mortgage repayments as you’ll both be named on the mortgage.
• You will be able to split the costs associated with owning a property e.g. Council Tax, Gas & Electric etc.

Cons of buying a property with a friend:

• Changing circumstances, for example, if one of you were to lose your job and couldn’t contribute to the mortgage repayments. Both parties will still be liable to make the full monthly repayment if your Lender doesn’t grant you an exemption.
• It can be considered more bureaucratic than buying a property alone. Both parties will no doubt be keeping individual records of who owes what, which can cause conflict.
• The potential for disagreements on what to do with the property if one of you wishes to sell.

Top tips for buying a property with a friend:

If you are to buy a property with a friend, you may want to explore obtaining a Cohabitation Agreement. This agreement will protect your financial interests and can be drawn up to confirm the financial responsibilities and contributions of the individuals.

If you are unsure about whether a cohabitation agreement will be suitable for your arrangements, then a Declaration of Trust could help instead. A Declaration of Trust is a document that sets out the beneficial ownership of the property and can be easily drawn up to differentiate between the individual shares in the property.

For more information and advice on either of these means to protect your investment feel free to get in touch here.

Can Tenants in Common get a Joint Mortgage?

Properties can be registered in two ways, joint tenants, or tenants in common. When you register a property as joint tenants then you have equal rights to the whole of the property. You are considered one entity, meaning that you will obtain one mortgage between you and if you decide to sell then you must decide this together. If one of you were to pass away, then your share will automatically transfer to the other joint tenant.

Registering a property as tenants in common means that each party owns a separate share of the property, and these can be in different sizes, for example, 40/60, although it is still extremely common to have a 50/50 split depending on the money that each individual has put into the property. When it comes to selling the property, you must be in agreement, the same as with joint tenants, however, tenants in common can leave their share of the property to a relative rather than the share being automatically transferred to the other owner.

For the purposes of getting a mortgage, it is most common to obtain a joint mortgage. Registering the property as joint tenants or tenants in common does not affect your ability to get a joint mortgage. Tenants in Common are legally able to opt to have their own individual mortgages for their share in the property, however, there are very few Lenders who would offer this service.

Alternatives to buying with a friend:

The main alternative to buying a property with family or friends is to purchase a shared ownership property. This means that you will purchase a share in a property and therefore pay considerably less money for the property. Shared ownership properties are classed as affordable housing and are becoming increasingly popular, especially with 20-30-year-olds.

To find out more about buying or selling a property with WSP Solicitors or to discuss your personal circumstances, you can get in touch using the form found here, or on this page. Alternatively, you can contact us by phone on 01453 847200 or email us at contact@wspsolicitors.com.