A combination of different factors, including rising property prices in many of the UK’s most popular locations, and the need for increasingly large deposits, are driving ever increasing numbers of first time buyers to club together and buy their first properties with a friend of partner. Buying a property alone is an increasingly difficult proposition and the UK property market is showing no signs of changing anytime soon.
Buying a property with some other people is an excellent way of spreading the costs of living and of securing a higher value property to live in, but it is a decision that you need to consider carefully before you commit. Here are 3 things that you and your friends need to consider before committing to buying a property together.
Be Upfront About Finances
Before any of you commit to the venture of buying a property it is important that you are all clear about the financial situation that exists between you all. It is always worth checking your credit report to avoid any nasty surprises. If you find out that one of you actually has a bad credit score then this can prevent you from securing a mortgage, and can even preclude you from renting a property.
Try Renting First
Buying a property together is a big commitment and not something that you should enter into hastily. It is always better to rent together first and to make sure that you make compatible housemates before you take the plunge with buying your own property. Not only will this help you to decide if you are compatible in terms of your habits and lifestyles, it will also allow you to see how each of you manages your finances so that you can be confident that you won’t run into problems with paying the rent or the bills.
If you are late making payments with multiple names on the lease, then you will all be held equally responsible for the missed payments.
Work Out What You Can Afford
Once you are certain that you are both ready to take the final step of buying a property together, it is then time to sit down and plan out exactly what you can afford and how you will divide your financial obligations. This is another reason why you need to be clear with each other about your financial situation, you both need to understand exactly how much you can each afford. You might want to look into writing a declaration of trust document, have a look at this declaration of trust guide for more information.
As a general rule, most lenders will allow you to borrow up to three times your total joint income if you are seeking a mortgage. If you are able to put down a deposit of 25% of the property’s value, then you can secure much more competitive rates than if you only put down the standard 10%.
Buying a property with another person is a major commitment. Both of you need to be sure that it is the right move for you and that you are prepared for all the obligations and responsibilities that go along with it.