Buying A Home With A Friend
Buying a home with a friend or a partner is a great way to get on the property ladder. You will need to get a joint mortgage and decide which is the best type of ownership for you. The two types of joint ownership are known as Joint Tenants or Tenants In Common.
Compare My Move work with property experts to ensure we bring you the latest and most insightful articles to guide you through the buying a house process. This guide will explain everything you need to know about buying a house with a friend.
What Is Joint Ownership Of Property?
If you’re planning on buying a house with a friend or a partner, you must first decide which type of joint ownership is right for you. The two types of joint ownership are Joint Tenancy and Tenants In Common and you’ll have to register the type of ownership with the Land Registry.
The type of ownership that you decide will determine what happens with the property if one of the owners dies or your relationship is to end. If anything changes in your relationship or friendship, you can transfer to a different type of property ownership.
It’s worth exploring both options to work out which will be best for you. You should also carefully consider which is the best way to buy a house for you and your situation. For more information, read our jargon buster for first time buyers so you're fully clued up on home buying terms.
What is Joint Tenancy?
Joint Tenancy is a type of property ownership where both owners have a 100% stake in the property, meaning they both equally own the property. Often referred to as ‘beneficial joint tenants’, Joint Tenancy will mean the property will go to the other co-owner if one person was to die.
Joint Tenancy is a common choice among couples, as you don’t have to worry about who has more of a share. When you sell a joint tenanted property, both of you will be entitled to an equal split of the sale proceeds, regardless of which one contributed more towards the house deposit or monthly mortgage payments.
It can decide to separate and sell, you both automatically get a 50% share of the property. If the separation is difficult, and one co-owner believes they contribute more financially, they can take the case to court which would determine a fair split.
What is Tenancy In Common?
If you’re a couple or two friends, buying a house using tenants in common ownership, then all co-owners will hold the equity in shares of the property. It’s normally assumed that tenants in common will each own 50% of the property, but it’s possible to arrange unequal shares via a deed of trust.
If one owner made a larger contribution to the house deposit, then they might want to register a higher proportion of the property’s value, such as a 25%-75% split. This can be changed over time to reflect both owners’ contributions if the other owner started earning more in a new job.
When you sell a property with a tenants in common ownership, each owner will know how much they will get from the sale price. If one tenant dies, their share of the property can be left to anyone, with no obligation to leave it to the other co-owner.
What is the Difference Between a Joint Tenancy and a Tenancy in Common?
Both Joint Tenancy and Tenancy In Common have pros and cons, but there are some important differences between the type of ownership you should familiarise yourself with.
|FAQ||Joint Tenants||Tenants in Common|
Who owns more of the property?
You both own 100% of the property.
You both own a share of the property. These can be equal or they can be different shares.
Who is this more suited to?
Couples usually use joint tenants for equal ownership.
Friends or relatives are more suited to a tenant in common ownership.
What happens if one owner dies?
The property automatically goes to the other owner if one dies.
The property doesn’t automatically go to the other owner if one dies.
Can I pass on my share of the property in my will?
How Many People Can Be On A Mortgage?
Buying a house with a friend or partner is an ideal option to share the costs involved in buying a house. If you’re buying a home with a friend, you will need to take out a joint mortgage. Typically, joint mortgages are taken out by two people, but up to four people are allowed to be on some mortgages.
Whilst some lenders will require all four members to be named on the title deeds, many lenders will only take into consideration the income of the two applicants with the highest salaries when considering how much mortgage you can afford to borrow.
Other lenders may require stricter rules such as the property being the main home for all four applicants, or all applicants being related to each other in some way, or that all applicants must provide a combined 20% deposit on the property.
Getting a joint mortgage can be a great way to share the costs involved with buying a house. However it can come with some disadvantages too. Below we list the pros and cons of a joint mortgage.
Advantages of a Joint Mortgage
- You can borrow more money together
- You’ll be able to put down a higher deposit
- Monthly payments will be shared between other people
Disadvantages of a Joint Mortgage
- Other applicants’ credit score could affect the process
- It can become difficult if you were to split up
- It can be difficult if you want to sell and the other person doesn’t
Who Can Get a Joint Mortgage?
Most people are eligible for a joint mortgage, but in the same way as a traditional mortgage, if someone you’re buying a house with has a poor credit score, they may be rejected.
If the usual financial criteria are being met, there are no restrictions on who you can take out a joint mortgage with - it doesn’t have to be just family members. You can get a joint mortgage with:
- Spouse or partner
- Parents or siblings
- Business partner
How To End A Joint Mortgage?
There may be many reasons you might want to get out of your joint mortgage. If you’re getting a divorce, splitting up with a partner or want to move out and buy your own home, it can seem daunting.
We’ve listed some of the ways you can bring a joint mortgage to an end if you need to. Probably the easiest way to end a joint mortgage is to sell the house. The funds from the sale will be able to pay off the remaining mortgage.
Another option is to transfer equity. This means you will be transferring the ownership of the house to just one person. Lastly, you could continue paying the mortgage until it’s all paid. This is common among divorced couples with children where one person would continue living in the house.
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