mates mortgage

geordie28

Hi folks

i was wondering if i could get a bit of advice. both myself and a friend are saving up to buy our first property on our own. we are both 30-31 and single with no kids. we both currently live with parents when saving. a flat has become available at a very good price in the perfect area for both of us. its a wee bit too high for me on my own with my current income. we are thinking about taking out a joint mortgage to buy the property. immediatly i see both pro's and cons to this.

pro's - better deposit and better mortgage rate, shared cost of living, on the ladder and not paying rent (the same flat would cost £600 to rent and mortgage around £540. i also see rent as money down the drain personally), low cost of living meaning i can still afford to save for my next place on my own, dont need to go to the hassle of getting a flat mate/potential stranger to take spare room if things get tight.
cons - its not fully mine, we might fall out, one or both of us find another half or have kids, death, job loss etc etc

i see a short term legally binding arrangment of 2,3 or 5 years. at the end of the term we sell up, split whatever we sell the place for 50-50 and move on our own ways. then we both have a deposit for our own place which will be 50% of whats left from sale plus whatever we have saved.

does anyone have any advice for me or potential hazards ive missed? is it a good idea or pie in the sky?

cheers

go_cat

What if one of you gets a girlfriend / boyfriend and wants them to move in / move out to be with them even on a short term this could be an issue

What if the flat goes into negative equity and one wants to sell and one doesn't

Sorry but I wouldn't want to advise two friends buying together

**woody123**

My advice would be for the both of you to save more money and buy your own places.

I'm 31, i've just bought a house on my own after saving a good deposit whilst living with parents. I am on my own in a 2 bed house but i can do what ever i want. I can choose to invite friends round or stay at home on my own. If i get into financial difficulty noone else but myself suffers.

Living with a mate could be great and you could love it, but the negatives far outweigh the positives.

townendwig

Hi geordie,
I see far more cons than pros with this sort of arrangement.

Why the rush to take out a mortgage now? What sort of position would you be in if you saved for another 6/12/18 months? You say a flat has become available at a very good price - have you checked the actual sold prices of similar flats in the area? Asking prices mean very little.

I would urge caution regards the myth of getting onto the 'property ladder' too. The entire concept is flawed, pedalled by the mortgage lenders in my opinion benefitting very few parties. its a classic sales technique "buy now before its too late!"
One could argue now is the worst possible time to 'get on the first rung' as we are in a period of falling or stagnant selling prices even with historically low interest rates which really can only go one way, this is an extremely toxic combination.

I would also say the monthly rent vs mortgage comparison is a very dangerous one to make. Whilst 600 vs 540 is the current comparison, remember we are in a period of historically low interest rates. What does that 540 look like if base rate is 6-8%? Mortgage rates at 8-10%?

Also if buying a flat you'll be liable for service charges you're not liable for when renting, as well as any maintenence and upkeep costs.

The practical issues around joint ownership are also risky. You talk about selling up after 2-5 years and splitting the profit. I don't think anyone would disagree that those days are over for now at least. What happens if you have to split the loss on the flat. Will you have the extra money to pay what you owe to the bank to get yourself out of negative equity?

Property is not a one way bet any more! I know many people who have had a relationship break down after taking on a mortgage together and who are unable to sell due to negative equity. What happens if one party has to move for work? or loses their job etc?

Just trying to paint the other side of the equation as it sounds like you haven't considered the very real possibility that you will owe more to the bank at the end of the 2-5 years than at the beginning...

Cheers
Wig

dawyldthing

the other thing is that 60 could easily go on repair bills each month, whereas with renting you can phone up and go 'landlord, washers broke, can you fix it please?' but if you buy its all on you, and can cost a lot more than the 60 per month

Yorkie1

I'm not sure that your 'legally binding' agreement will prove to be such a thing. In 5 years it is possible that the property could be in negative equity and so be very difficult to sell or to buy out the other person.

PasturesNew

Don't buy with other people - especially in a small flat. You'll go round the bend by this time next year.

Other people suck. Stay away from them. Bite the bullet, stay where you are and save HARD for your freedom and independence.

princeofpounds

i also see rent as money down the drain personally

Stupid attitude. Owning a house with a mortgage is just renting money from the bank.

Whilst owning can be financially better than renting, and has been strongly so since the early 90s, it is not an immutable truth.

Many of the cons of the idea have been explained above. You might not even be able to sell if you are in negative equity.

Think about it very carefully, buying is a not a short-term transaction. The transactional costs alone can be far more than any potential saving in rent if spread over less than several years, especially if stamp duty is involved.

poppy10_2

PasturesNew wrote: »

Other people suck. Stay away from them.

Good advice, listen to this woman.

Kynthia

Buying a property with a friend is only a good idea in very rare circumstances. If you do decide to do this then there are legal agreements you can sign to plan what to do should one of you want to move someone in, move out and rent their room, want to sell, lose your job, get relocated, married, etc. Definitely get legal advice.

However in a housing market that is stagnant/falling there is a very good chance you won't make any profit from the flat, particularly when you take into account buying/selling/moving costs. You could even end up in negative equity and be stuck. At your age your lives are likely to change a lot in the next five to ten years. Sharing can be a nightmare and I find that you never hate someone as much as a flatmate. What if interest rates go up as there's a very good chance they'll rise to 6% at some point, how does that affect your maths?

With renting you are paying for freedom and flexibility.