Buying a New Home with a Friend
When you look at the general pros and cons, they are very similar. In terms of the benefits when you buy a new home with a friend, the costs are shared just like they are when you buy with a partner. As a result:
• It is easier to save for a deposit
• You can buy a more expensive home
• The monthly mortgage payments will be lower than buying on your own
• You may also be able to take the mortgage over a shorter term
• Maintenance costs are shared
• Stamp Duty is shared
• Utility bills are shared
Many of the above benefits are further enhanced when you buy a new build property. For example, you may have access to the Help to Buy scheme which can make purchasing the property even more affordable. In addition, maintenance costs and utility bills will be lower in a new build home.
What about the cons of buying with a friend? Again, these are very similar to buying with a partner. They mostly apply when the relationship breaks down or one person in the relationship doesn't keep up their end of the deal. If you're not careful when you initially purchase the house, this can get messy whoever you buy with.
In addition to the above, there are important and specific differences when you buy a home with a friend compared to with a partner.
Buying with a Friend Rather than a Partner
One benefit of buying with a friend is that up to four people can buy a single residential property. An arrangement involving more than two people can reduce the cost of owning a home even further. This is an arrangement that is much more common among friends rather than couples.
The main benefit of buying with a friend – or friends – however, is the ownership structure. There are two main types of home ownership structure in the UK where more than one person buys the property:
With this option, everyone involved in the property purchase has equal ownership. So, for example, in the event of you or your friend’s death, ownership of the whole property passes to the surviving person.
Tenants in Common
With this option, the share of the property that each individual owns is specified. This makes it easier, for example, to work out the share of equity you are entitled to when you sell the property. In addition, if you die, your share in the property passes to whoever you specify in your will.
Both ownership options are available to you whether you buy a house with a friend or your partner. The reality, however, is that most partners buy under a Joint Tenancy structure. This is because the Tenants in Common option envisages a time when you will no longer own the property together. It also assumes you will have separate interests or objectives when that time comes. Many couples are reluctant to face this. When buying with a friend, however, it makes complete sense.
In addition, you are more likely to have a co-habitation agreement in place when you buy with a friend. This is a legal document that includes various specifics including who paid what, how you will share household running costs, whether you can rent rooms in the house, and more.
So, while buying with a partner has personal importance as well as practical and financial importance (i.e. many couples see it is a commitment to each other), you will probably have greater legal protection when buying with a friend so long as the ownership is Tenants in Common and you put a co-habitation agreement in place.