Mortgaging With A Friend?

Being independent and keen to get on the property ladder, it can be a challenge to find the perfect property where everything adds up and where you can find a balance, between the costs of owning a property and being able to afford the lifestyle your independent spirit wants to dive into and explore. As the property market shows very little sign of slowing down and house prices continue to simmer in an upwards direction, it might be worth considering buying a house with a friend. But, taking on one the biggest loans of your lifetime means you have to be on very sure and sturdy ground with your friendship to avoid things going sour further down the road. While it might appear to offer a solution to getting your foot on the property ladder, it can by no means be regarded as a simple undertaking.

Below is a guide to 5 things you should consider before shaking hands and signing up to a mortgage with your best mate and elevating your friendship to a new level…

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Shop around

When looking for a mortgage, you shouldn’t take the first deal you’re offered. Be confident and assured of your mortgage advisor and ask for recommendations from family and friends. An independent mortgage advisor who has access to a range of mortgage suppliers is more likely to find the best mortgage deals suited to you and your circumstances. You should also do your own research on the internet and find any lenders who offer special deals, specifically designed for people who are seeking joint ownership of a property.

Draw up a declaration of trust

Before committing to taking out a mortgage and purchasing a property with a friend, you should visit a solicitor and draw up a declaration of trust. This is a legal document which sets out the conditions under which the property can be sold and the notice period needed if one party decides to move out. Organising a declaration of trust will really test the mettle of your friendship and can help you decide whether or not buying with a friend is for you.

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Keep copies of the paperwork

When more than one person is signing for a mortgage, it’s important that all parties and co-buyers have access to any legal or financial paperwork. You should make copies of any important contracts or statements and make sure all parties have the documents.

Open a joint account

The mortgage payments for a co-owned property will typically be taken from one named bank account which is linked to the mortgage agreement. You should consider opening up a joint account with your friend, so that neither of you has the sole responsibility of the mortgage and other bill payments. One critically important thing to consider is that once you open a joint bank account, you will be co-scored in relation to credit ratings. So, how you both manage your independent and joint finances will likely have an impact on your individual credit scores.

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Make an inventory of items you buy for your new home

If you need to purchase items such as sofas, beds or wardrobes for your new home, you should carefully draw up an inventory, noting who contributed to or purchased each item. This can help to avoid conflict if one of the co-owners decides to move out at a later date.

Keep records of ongoing expenditure

While co-habiting, keep a record and copies of receipts for all purchases contributing to your joint household. It would be worthwhile agreeing in advance what further expenses like food, cleaning, laundry costs etc., you want to share. A simple money accounting book where you can enter expenses on a monthly basis by logging, signing for and dating receipts will keep you both informed of where expenditure is going and who is paying for what.