Buying a property with a friend can be a good option to get yourself onto the property ladder because of its affordability. You have someone to share the upfront and ongoing cost of owning a house. You and your friend can split the utility bills, the maintenance costs, the home loan repayments, and so much more.
While the benefits of buying a property with a friend sound appealing, there are also some disadvantages involved such as the risk of your friend defaulting on the loan.
To make sure you can avoid potential problems down the track, we have listed the top things you need to consider when buying a house with a friend. Here they are:
Buy with trusted friends
Obviously, you want to buy with someone who you’ve been friends with for a long time, who you trust, and who you are very close to. It will be difficult to live with someone who you barely know. Additionally, you and your friends should be open about your finances.
Agree on the type of house
The location, amenities, number of rooms and bathrooms are just some of the things you should discuss with your friends regarding the house. It’s important that you are in agreement when buying about the type of house or investment property.
Home loan options
Even though you have someone to share the loan repayments with, it’s still necessary to get a home loan package that is suitable. Interest rates should not be your only concern. You should also check what features the loan has such as a redraw offset facility, split loan facility, and more.
Structure of co-ownership
You and your friends will need to consider the kind of property ownership. Typically, there are two types:
- Tenancy in common: where two or more people own the property together. The shares can be of unequal sizes. The ownership can be passed to the chosen beneficiary of the owner.
- Joint tenants with the right of survivorship: means both of you own the whole property equally. If one of the tenants passes way, the property will be given to the surviving one, hence the name ‘the right of survivorship’.
Solicitor or Conveyancer
When buying a property with friends, it’s important that everything is clearly discussed and legally documented. You can consult with a solicitor to put everything into writing to avoid any disputes. This should include the complete details of your agreement such as the type of co-ownership, splitting the mortgage repayments and other monthly expenses.