Can you join with a friend to go half-ers on a mortgage?

fireballpaul

Giving each other 50% of the home?  One of us (say me) will live in the new place until it's paid up (possibly even after that but who knows).   Looking at a relatively low value property say £120k


Thanks
Paul

p00hsticks

Where would the other live in the meantime ?
It's certainly possible for two friends to buy a property to live in together  with a mortgage, but you'd both need to be very clear on what you wanted to happen if e.g. one wanted to move their girlfriend / boyfriend in, or move out to buy another property... 

Yorkie1

Also bear in mind that there may be extra stamp duty land tax to pay if either of you was to buy your own separate property at a later date.

fireballpaul

p00hsticks said:

Where would the other live in the meantime ?
It's certainly possible for two friends to buy a property to live in together  with a mortgage, but you'd both need to be very clear on what you wanted to happen if e.g. one wanted to move their girlfriend / boyfriend in, or move out to buy another property... 

The other friend has his own place so would only be putting up the money.  Of course, he could use the other property at any time (2 bedrooms) but most likely just wants to do own 50% of a house after a few years - and then sell it

ACG

What happens if you become ill and cant afford to buy him out? 

As suggested, you need to talk about if/when he wants his money back and what happens in the worst case scenario. Treat it like a business deal and be brutal with each other. Then if you decide to proceed you can go back to being mates in the knowledge you have got the negatives out of the way. 

When I sign any agreements, I am more bothered about what happens if I want to get out of the agreement than I am on the nice bits going into it. 

Newbie_John

With a friend, yes totally fine but.. what you're suggesting is that a friend will live somewhere else and that gets tricky - for them it will be another property - higher mortgage rates, stamp duty etc. it may all add up.

And also the main question - what happens if you want to move out, they want their money back, property loses on value and will be worth £80k, they get into massive debts and you may be forced to sell.. 

fireballpaul

Newbie_John said:

With a friend, yes totally fine but.. what you're suggesting is that a friend will live somewhere else and that gets tricky - for them it will be another property - higher mortgage rates, stamp duty etc. it may all add up.

And also the main question - what happens if you want to move out, they want their money back, property loses on value and will be worth £80k, they get into massive debts and you may be forced to sell.. 

Yes the friend already has his own house in order and can stay put apart from visiting- this would be them contributing to to half the new house and owning it.     

If things go wrong would it not just be a foreclosure like any other situation ( lose the house, some money refunded etc..)

Grumpy_chap

fireballpaul said:

Giving each other 50% of the home?  One of us (say me) will live in the new place until it's paid up (possibly even after that but who knows).   Looking at a relatively low value property say £120k


Thanks
Paul

Two people (unrelated) can buy a property on a mortgage if they are both going to house-share making the property the PPR for both of the individuals.

If only one of the individuals is going to live in the property, where does / will the second individual live?

Do either (or both) of the individuals already have a property, or had property in the past?  This can impact FTB status for this property purchase and will impact FTB status for future property purchase.

Will the one residing in the property pay rent for the other half to the second owner?
Second owner will incur income tax liability on the rent.
Second owner will accrue CGT liability when the property is eventually sold.
Second owner will probably require BTL mortgage on their half of the property they do not live in - so higher interest rates.

How will maintenance and repairs and improvements be funded and how will the gain be split when the property is eventually sold?

fireballpaul

Grumpy_chap said:

fireballpaul said:

Giving each other 50% of the home?  One of us (say me) will live in the new place until it's paid up (possibly even after that but who knows).   Looking at a relatively low value property say £120k


Thanks
Paul

Two people (unrelated) can buy a property on a mortgage if they are both going to house-share making the property the PPR for both of the individuals.

If only one of the individuals is going to live in the property, where does / will the second individual live?

Do either (or both) of the individuals already have a property, or had property in the past?  This can impact FTB status for this property purchase and will impact FTB status for future property purchase.

Will the one residing in the property pay rent for the other half to the second owner?
Second owner will incur income tax liability on the rent.
Second owner will accrue CGT liability when the property is eventually sold.
Second owner will probably require BTL mortgage on their half of the property they do not live in - so higher interest rates.

How will maintenance and repairs and improvements be funded and how will the gain be split when the property is eventually sold?

Aiming for as much 50 50 as possible apart from the resident (say me) paying all the house bills like council tax and gas/electric.    
Other person owns their house and will own 50% of this one.   It may not be sold in the future, perhaps just rented out to a stranger after Paul moves out. 

Grumpy_chap

fireballpaul said:

Aiming for as much 50 50 as possible apart from the resident (say me) paying all the house bills like council tax and gas/electric.    
Other person owns their house and will own 50% of this one.   It may not be sold in the future, perhaps just rented out to a stranger after Paul moves out. 

That is not wholly clear - who pays if, say, the one living in the property wants an upgraded kitchen?  Who gets the gain in value attributable to that when the property is eventually sold?

If one of the purchasers already owns a property, then AIUI second property stamp duty surcharge will apply to the whole purchase price.

"It may not be sold in the future" is not a possible outcome.  At some point in the future, the property will be sold.  Even if that only occurs following a forced event such as death of one of the owners.

user1977

fireballpaul said:

Newbie_John said:

With a friend, yes totally fine but.. what you're suggesting is that a friend will live somewhere else and that gets tricky - for them it will be another property - higher mortgage rates, stamp duty etc. it may all add up.

And also the main question - what happens if you want to move out, they want their money back, property loses on value and will be worth £80k, they get into massive debts and you may be forced to sell.. 

If things go wrong would it not just be a foreclosure like any other situation

"Foreclosure" is a (usually American) term referring to a mortgage lender repossessing, not joint owners "splitting up".