Buying a house with a friend

david29dpo

I have lived with a friend for 18 years.
The main reason was to pool our money to buy a better house than we could have separately, plus our running cost are lower.
It works for us.
All i can say is lots of common sense is needed.
I have seen plenty of married couples split in all those years.

getmore4less

Don't forget to add death to the exit plans.

sammyjammy

JQ. wrote: »

Question for the doomsayers - what's the difference between buying with a friend who you've lived with for several years and buying with a girlfriend?

I can understand reservations when buying with a stranger or someone you've not lived with before, but someone you know well should not be an issue so long as you enter it with eyes wide open.

ps - people tend to not come onto forums such as this to report how well a joint purchase has gone, which is why we only see the car crash posts.

Thats very true but I don't think anyone is being a doomsayer as you put it. In real life I only know of situations where its all gone terribly wrong too.

The difference between doing this with a girlfriend (and all those questions above should still be asked and considered carefully) is that if all goes well that relationship will last a life time, with friends their lives will move forward so that the housing sharing situation no longer suits them.

jelajelavic

Thanks for your comments some are very useful.

You have read that I did have two credit card maxed out but maybe didn't read all of my post were I said I had received some money and paid off some of my credit.

And I do have money for a deposit or I wouldn't think about buying a house and previously said in this post we'd be splitting the deposit 50/50. We both have access to £70-80k each so can put down £140k-160k for a deposit with the intention of buying a £500k house so a LTV of less than 80%.

Thanks your your post though lots of good advice

bowlhead99 wrote: »

I notice from another thread that you recently had 2 maxed credit cards, one over 25% APR and were declined another. That implies you don't have 10%+ house deposit plus stamp duty and costs and the ability to contribute to mortgage, maintenance, improvements as well as your housemate. I would not want to go into a deal like this being the poorer of the two partners and always being on the back foot when trying to pay my way. And if the housemate's finances are even worse than yours, you'll be waiting some time...

Still, you didn't ask about how to get the money. If your cashflow has improved and you have a normal first-time buyer deposit, and there are only two of you, you shouldn't find it particularly difficult to get a mortgage (at least not more than if you were married or civil partners) - you can shop around online or use a broker. The online forms all expect up to two joint applicants, it's only if you are looking to buy with two or more mates, i.e. 3-4 people, that you'd need to go into a branch or broker in person to be treated as a special case.

Even if 5-10% deposit mortgages are available I would look to get a bigger deposit - as the risks of buying with friends is that your separate developing lives don't keep you together the same way a family would stay together; if the risk of splitting up is greater, you really want to avoid the negative equity possiblity, by putting in more than the bare minimum. You mentioned income protection insurance - is that guaranteed to pay out in every eventuality, and for long enough that one person being ill or really ill wouldn't cause inconvenience or hardship to either of you?

jelajelavic

bowlhead99 wrote: »

- another exit route is death. If your co-owner was a wife or partner you might let them have your share of the house if you died. If they are a mate, you might prefer your family to get your share of the house. So when you die your mate is now co-owning a house with someone he doesn't know or like and who can't afford the mortgage or has no interest in paying it. He could sell, but what if your heir doesn't want to, or the housemate doesn't want to because his life savings turned into negative equity and it's a reeeeally bad market to try and sell in rather than hanging on to try and come out the other side. Your death could really screw him over financially.

Insurance is probably of use here but not so much that you actually buy him an entire free house... you might instead prefer to spend the premiums on insurance for your family's benefit, or personal investents or holidays, or saving up to buy him out quicker.

Beyond these basic (!) issues of ownership you have all the other things you'd normally have in your 'gentleman's agreement' you had when renting: ground rules for living together generally. An inventory of who owns what in terms of white goods, dining table, sofas etc? Who buys the bed for the spare room when you already both have a bed and neither of you think you'll want two beds when you sell up and go back to living in separate flats? Who does the washing up, whose turn is it to mow the lawn or put the bins out? Are you allowed pets?

Food for thought. And this is not an exhaustive list, even if it is exhausting to read

Exit planning is important and didn't think about death too much (was kind of hoping that wouldn't happen before we sold) but we should has it is very important. We both have life insurance with our firm (work for the same company) but would need to agree on what we do if it happened and who pays what and who receives the insurance pay out.

Can this all be included in a co-habiting agreement?

getmore4less

jelajelavic wrote: »

Exit planning is important and didn't think about death too much (was kind of hoping that wouldn't happen before we sold) but we should has it is very important. We both have life insurance with our firm (work for the same company) but would need to agree on what we do if it happened and who pays what and who receives the insurance pay out.

Can this all be included in a co-habiting agreement?

RISK could both lose your jobs at the same time.


Remember exit/sales can take time so part of the plan could be to agree a buffer fund to pay any mortgage.

bowlhead99

jelajelavic wrote: »

Exit planning is important and didn't think about death too much (was kind of hoping that wouldn't happen before we sold) but we should has it is very important. We both have life insurance with our firm (work for the same company) but would need to agree on what we do if it happened and who pays what and who receives the insurance pay out.

Can this all be included in a co-habiting agreement?

You can put what you like in an agreement. Once your company life insurance expires due to changed job or change of benefits, what alternative provision will you require? How will you know he's still making payments to his policy and it's still valid? What is the penalty for dying without adequate insurance and how can you enforce it?

As with all things between friends there is a level of trust you can live with, but the boundaries probably move as relationships change. Too simple, and you don't have the protection you thought you would. Conversely if the agreement is a hundred pages long and extremely complicated, with the spirit of the agreement only really understood by the two parties writing it, good luck trying to enforce that in court - they would probably set it aside and use some reasonable interpretation they came up with themselves.

getmore4less wrote: »

RISK could both lose your jobs at the same time.


Remember exit/sales can take time so part of the plan could be to agree a buffer fund to pay any mortgage.

This is sensible as your life savings (or perhaps some generous relative's) are wrapped up in an illiquid asset and the mortgage lender has first dibs, and your plan to keep it out of their hands currently rests on that employer sending you both paychecks.

Even if you had different jobs and slightly lower risk, it would make more sense to put 60k in the property, with a worse house or perhaps a worse LTV and a higher interest rate, but 10k cash in the bank as an emergency fund. If you had saved up the 70k pound by pound yourself over the years you would probably not now put 100% into the property as a coinvestment with your mate, so don't act differently because you have got access to the deposit by other means.

tara747

Don't.

Do.

It.


I've seen some shockingly bad fallouts from this kind of thing.

tonycottee

How long are you planning to live together?

somethingcorporate

Do you earn enough to comfortably afford a £360k mortgage between you?