Due to the huge increase in house prices over the last few years, many people are simply finding it too difficult to get on the housing ladder. The housing boom has made it almost impossible for many potential first time buyers, some of whom are already burdened with big debts on credit cards, student loans, etc.
It seems a combination of existing debts and inadequate salary from their job are making many ineligible to take on a large mortgage, while some others are just barely getting in thanks partly to financial help from their parents.
Other than trying to buy a house on your own or with a partner, there is a more radical option – sharing the burden with friends. The theory is that, by combining the salaries and financing with friends, a bank would more readily accept to mortgaging because of the lower risk of default as more than one of you will be contributing to repayments.
However, buying a house with friends has different repercussions than would be the case if buying on your own with a partner or another family member.
Here are some tips that could help to determine whether you like the idea of sharing with friends or, preferably, wait a bit longer until such time you can get a mortgage on your own.
In the UK, up to four people can be named on a mortgage contract.
The lenders will draw up the sharing contract
Because you are in a sharing agreement with friends, it is vital that all the components of the contract is fully laid out so everyone is aware of their share in terms of ownership, the contribution to repayments, etc. Luckily, the mortgage issuers (lenders) are very strict in this regard and everyone will be aware of their part in this agreement, just in case someone wants to bail out after awhile due to changes in their circumstance, or for any other reason.
Different incentives offered by lenders
Lenders issuing mortgages are now realizing clubbing together to buy homes is a big growth area, especially in the current climate of booming house prices; therefore, this has created competition to attract such buyers with lenders offering different types of incentives. It is vital that you shop around for the interest on repayments when buying a home with friends.
Sharing the financial burden
By pooling the financial resources, you will be able to buy a property that otherwise would not be the case.
Circumstances may change
One major problem with buying a house with friends is that their circumstances can quickly change that leads to one or more parties wanting out. For example, on party may get into a new relationship that forces them to change their plans. Although a firm contract helps in this regard, but this can be unsettling and would require a new contract being drawn up.
Not being able to call a home your own
There is certain amount of pride attached to owning a home on your own or with a loved one rather than sharing with friends. Of course, this will depend on the personality and characteristic of the people involved.
Disagreements about money – There may be disagreements about money in regards to costs such as food, bills, repair costs, etc.