Business Personal Finance

Tuesday 12 November 2019

Top tips if you're buying with a friend

IF you are hell-bent on buying property with a friend, sibling, child or lover, is there anything you can do to avoid running into problems down the line?

* Buy with someone you know and trust – and don't buy under duress.

* Go in with your eyes open. "Think it out carefully in the knowledge that it's not an ideal world and things change," advised David Hall of the IMHO. "You could move on, one of you could lose your job – and one of you could emigrate. There is no way in the world I'd advise anyone to buy a house with a friend. The risks and inherent dangers of doing so are very significant."

* Understand exactly where you stand. The best way to do this is to get legal advice and draw up a formal shared ownership agreement. "Think about issues like how you would handle the repayments should one of you lose your job," says solicitor Bill Holohan. "If one person pays more than another towards mortgage repayments from the start – or after the other loses their job, be clear if that person get credits for extra contributions and how. Set down how much of a deposit each person is putting into the property. State how the quality of each friends' contribution will be reflected in the percentage of ownership."

Agree what will happen if one of you decides to move on – for example, if one person wants to buy the other out instead of selling up completely.

* Know the limitations of shared ownership agreements. "A shared ownership agreement is only an agreement between you and your friend – not with the bank," said Honohan. In particular, understand the joint and several liability clause in your mortgage. "In general, both of you are liable for the mortgage," said a spokesman for the NCA. "This means that the bank may recover all of the liability (mortgage) from either borrower regardless of their individual share in the mortgage."

* Make sure you are both covered for mortgage protection insurance so that the mortgage is repaid should either of you die before the mortgage is repaid in full.

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