The dynamics of property buying are shifting, with more than half of prospective buyers acknowledging the impact of the current economic situation on their home-buying plans, including who they plan to buy with. If you're contemplating the exciting venture of purchasing a property with a sibling or friend in South London, Ben Thompson, Deputy CEO at Mortgage Advice Bureau, offers invaluable insights to consider before taking the leap.
- Check Affordability Together: Before embarking on your property search, have an open and honest discussion about your financial commitments. This includes the deposit, monthly mortgage repayments, and general living expenses. Pooling resources can often mean affording a larger property in a preferred location, splitting both the mortgage costs and regular bills, creating a win-win situation where your money contributes to your mortgage, not your landlord's pocket.
- Honesty About Financial History: Money matters can be sensitive, but it's crucial to discuss your financial history and any potential issues that might affect your mortgage eligibility. Being aware of each other's financial backgrounds can prevent unpleasant surprises when applying for a mortgage.
- Understanding Joint Mortgages: If your borrowing requirements exceed your individual income, a joint mortgage might be the solution. Some lenders permit up to four individuals on a mortgage agreement, although they typically consider the two highest incomes to determine the loan amount. It's important to note that everyone on the mortgage is jointly responsible for payments, and if one party can't pay, the lender can demand full payment from the others. Meeting individual lender requirements and credit criteria is essential for all named borrowers.
- Tenants in Common: Consider owning your respective shares independently, proportionate to your contributions, by becoming tenants in common rather than joint tenants. This allows you to sell your share to receive a proportionate return on your investment. For example, if you contribute 40% of the house deposit and mortgage payments, your share will be 40% of the house's value, whether it appreciates or depreciates.
- Draft Legal Agreements: Regardless of your relationship—whether siblings or friends—it's crucial to create legal documents, prepared by a professional solicitor, to protect both parties in case of a share sale, relocation, or financial difficulties. These documents may include a declaration of trust or a cohabitation agreement. While it may feel uncomfortable now, having these details in writing can prevent misunderstandings or disputes down the road.
- Consult a Mortgage Adviser: Before selecting a property or exploring mortgage options, schedule a meeting with a mortgage adviser. They can not only address your queries but also help you calculate your potential borrowing capacity on a joint mortgage before applying. Moreover, they have access to rates and lending offers that might not be available on the high street, assisting you in finding a mortgage tailored to your unique circumstances.
Ben Thompson emphasizes the importance of informed decision-making in these challenging times, where high inflation levels are impacting finances. Buying with someone else can offer benefits like reduced living costs and shared deposits, but thorough preparation and communication are key to a successful joint property purchase. If you need further advice or have questions about buying a property with a sibling or friend, please feel free to comment below or send us a message. Your homeownership dreams are within reach with the right guidance and knowledge.