Buying property with friends – the good, the bad & the ugly!

If you are finding it hard to buy a home on your own, an option to consider is teaming up with friends or family. By pooling your resources with family or friends you are compatible with, you may be able to break into the property market earlier than you think. However, there are important factors to consider before purchasing a large asset with someone who may not share your lifestyle or habits.

So what are the legal issues you should be aware of?

Although purchasing a property with friends might seem like a lot of fun initially, when situations change and someone wants to exit, things can become complicated. Two common risks are:

1. Future borrowing capacity is affected. Being jointly responsible for a mortgage may make it harder to secure a loan for another property later, as affordability is usually assessed on an individual's income while taking into account full joint liability. If a co-owner decides to buy another property, lenders will typically assess the entire existing loan as that borrower's responsibility, while only counting a portion of joint rental income. This impacts borrowing capacity both through higher assessed liabilities and reduced recognised income.

2. One owner wanting to sell. Problems can arise if one co-owner decides they want to sell when the others are not ready or planning to do so.

How can you minimise these risks?

It is important to seek legal advice from a solicitor before deciding to co-buy, as individual circumstances differ.

When establishing the legal agreement, it helps to plan for worst-case scenarios. Deciding in advance what happens to the property if a fallout or change in circumstances occurs is essential.

Monthly expenses shared

Once you own a property, ongoing costs such as maintenance, repairs, and utilities add to mortgage repayments. Sharing these expenses with co-owners can significantly reduce the individual financial burden, providing room to build savings or reduce other debts.

Home equity

The longer co-owners hold the property and pay down the mortgage, the more equity may accumulate. Equity represents the home's value minus the outstanding loan balance. If co-owners eventually part ways, selling the home allows proceeds to be split and potentially used towards deposits for individual properties.

It’s just fun!

Living in a co-owned home offers the lifestyle benefits of shared living, often reducing social expenses by spending more time at home. Because buying is far more permanent than renting, choosing the right co-owners from the start is critical.