Buying a first house with a friend

futureperfect

I'm thinking of buying a house with a friend/friends.
We'd need a mortgage.
I'm unsure of the rules or best way to approach it.

• The property is 2 bedrooms. I wouldn't live in the property but my friend might, or we would rent both rooms out
• I have a help to buy isa which is as full as possible, my friend doesn't

Could we get a joint first time buyer mortgage? Could I use my Help to Buy bonus even though i wouldn't be living in the property? Could we rent out the other room or both rooms?

Thanks!

da_rule

For the ISA, you must occupy the purchased house as your main home and you cannot rent it out (you can have a lodger).

Some first time buyer mortgages require both/all parties to be first time buyers, some only need one.

Most mortgages will allow you to take in a lodger (some may require you to notify the lender). If you are going to rent both rooms out then you'd need a buy to let mortgage. If you are renting the rooms separately then you may need to be mindful of the HMO rules.

futureperfect

thanks!
If he was to live in one room and we got a lodger for the other could we get a normal mortgage then i.e. 90%LTV for example.
As he'd be living there we'd need to work out how the monthly repayments were split i.e. would he need to more than half the monthly repayment as he is also 'renting' a room. And would we split the lodgers rental income 50/50?
Any advice?

davemorton

futureperfect wrote: »

Any advice?

Yes, dont do it, it sounds far too messy and could end rather badly.

da_rule

Just because he's living there doesn't mean he should pay more? So splitting the mortgage would probably be the easiest way to go. Also, you'll be jointly liable for the mortgage so the lender can come after you both individually to separately. Assuming you are going to own the property on a 50/50 basis then income will be split equally.

You may need to run it past the mortgage company/mortgage broker that you won't be living there.

Also, if your friend isn't a first time buyer, does he own another property? If so, the purchase will incur a higher rate of stamp duty. Also, you'll be liable for the higher rate of stamp duty too should you buy another property. And there may be capital gains tax implications when you come to sell the property you're looking at now.

minimike2

davemorton wrote: »

Yes, dont do it, it sounds far too messy and could end rather badly.

Exactly this.

Search for "buying a house with a friend" and see how many horror stories you come across when one wants out.

Don't do it.

futureperfect

so you'd recommend waiting and saving my own deposit?
That would mean a 25% deposit though as I couldn't live in the property. This method makes it achievable but I agree it's messy and riskier (although the financial burden is split)

jimjames

futureperfect wrote: »

so you'd recommend waiting and saving my own deposit?
That would mean a 25% deposit though as I couldn't live in the property. This method makes it achievable but I agree it's messy and riskier (although the financial burden is split)

It's a bit different if you're both living in the house. Your OP was a bit unclear if either of you would live there.

da_rule

Why do you want to buy a property if you can live in it?

With the changes that are coming in relation claiming tax reliefs on buy to let mortgages it probably isn't going to be that profitable.

Also, a lot of buy to let mortgage providers will be weary of lending where you don't own another property.

nicholbb

Good news
you could get £7,500 tax free from lodger to help with mortgage.

Bad news
3% extra stamp duty if they already owns or you buy another place.
18% (or 28%) on profit when you sell potentially
You may struggle to pass affordability on another home.
Your mate gets a (horrid money grabbing) partner, they want them to move in and kick lodger out.
Your friend loses their job and can't afford mortgage, can you?
Your friend misses a few card payments by mistake, financially you are linked through mortgage, you can't get credit now!
Your mate gets £20k and wants to pay off chunk of mortgage but wants greater equity than you think is fair.
You go to sell the house, offered 5k below asking price, you want it for a new dream house with person of your dreams, mate says no want full price, your place falls through.
New boiler needed at cost of £2k, you don't have the cash but friend is demanding it, just because you don't live there you don't care! Well they're not paying their mortgage till it's got heating, enjoy your default.