Buying with a friend - part mortgage part cash

megababe18

HI There, I am looking to buy a house and mentioned this to a friend who is also in the same boat. We realised that if we clubbed together, we could afford a much larger house, enabling us to rent out some of the rooms.

She is in the fortunate position to be able to supply her half of the property cost outright (having sold an inherited property), whereas I would need a mortgage to have my share.

Is there a way to have the house split 50-50 so that I could only have a mortgage for my share - sort of like an asset in which I want to buy in to? What if we set up the house as a company and owned 50% shares in each? Would I still be able to get a mortgage for my 50%?

cheers
N

kingstreet

No. There isn't.

If there's to be a mortgage, the owners and the borrowers must match. You may be able to have more borrowers than there are owners, but not the other way round.

Lenders don't mortgage half a property. How would they repossess it if the mortgage went into arrears?

holly_hobby

Yep, if a mge is reqd, than your friend (as co-owner) would also need to be party to it, which means along with status assessment of her/him self, they will also be jointly and severally (singularly) liable with you for its repayment.

Ownership wise as friends, and if you elect to proceed in purchasing together, I would recommend to do so under a Tenants In Common arrangement, which means that there is no automatic tsf of equity to the surviving owner upon 1st death, and that your share may be bequested via your will (or otherwise will follow intestacy laws if no valid will at time of death).

Hope this helps

Holly

megababe18

Thanks guys, we have gone with the tenants in common option and have a contract between us regarding the investment

Beckyy

Did you manage to get the joint mortgage sorted?

Also, another thing to think about it how long you keep the house for. I know somebody who bought with a friend and they had made an agreement to sell the house 5 years after they bought it, and one party could buy the other out if they wanted to keep it to save arguments if one wanted to sell but the other didn't.

JimmyTheWig

Obviously there is no reason why you can't have a mortgage in both names but the repayments come out of your current account.

But it would be a debt in your friend's name. It would show on their credit report. If you didn't pay they would get a black mark, be liable to be taken to court, may lose their home. If they want to get a mortgage on a different property, this mortgage will affect their chances.

But if everything went to plan you can pay the mortgage just as if it was in your name.

CLAPTON

Beckyy wrote: »

Did you manage to get the joint mortgage sorted?

Also, another thing to think about it how long you keep the house for. I know somebody who bought with a friend and they had made an agreement to sell the house 5 years after they bought it, and one party could buy the other out if they wanted to keep it to save arguments if one wanted to sell but the other didn't.

absolutely essential to have a clear written plan for one party wanting to leave the arrangement to include
-the possibility that the property drops in value
-what happens about selling costs
-valuation if one is buying the other out