Recent media has highlighted an increase in the trend of friends buying with friends.
Last year, M&S bank launched a ‘Four Way’ mortgage, saying that demand was there for its use. This was unusual in the mortgage market but more and more millennial’s are choosing to pool resources and purchase with their friends. London & Country mortgages have detected a slight increase in mortgages with 3 or 4 named applicants, but in research carried out by the BBC News, they told reporters that this doesn’t take in to account 2 friends buying together and doesn’t detect those helped by parental backing.
However, such mortgages are still not in the Mainstream, with most lenders capping the maximum number of borrowers at 2. Here, Ashley Mallett, a solicitor in our residential property department, takes a look at some of the advantages and disadvantages of purchasing with your friends.
Advantages
- You get to live with your friends! Those coming out of situations such as student accommodation may be acclimatised to this and if you’ve have a good time, this can continue on similar arrangements;
- You can pool your resources such as deposit savings and mortgage capabilities meaning you can get a bigger house or a house in an area which you otherwise wouldn’t have been able to afford;
- You may feel that it will develop closer bonds and relationships between your group, creating a “pack” where you all help one another;
- As life develops, there are potentially friends around who can assist you chores and potentially childcare
- It may allow people, especially millennial’s, to access the housing market which they otherwise would have been excluded from.
Disadvantages
- If the agreement or a friendship/relationship breaks down, you will need to know where you stand. I would advise a co-habitation agreement or a Declaration of Trust to consider such circumstances which can be drafted by our specialist teams of lawyers;
- You will need to consider protecting what you have put in so you don’t lose it. Consider a Declaration of Trust which we can advise on;
- If one person wants to leave the agreement, the others will need to ensure they have funding to ‘buy out’ that party and if there is a mortgage, the means to cover the existing debt. If they cannot, it is unlikely the lender will agree to release the party which wants to leave and they will be stuck;
- You will need to consider what happens if someone wants to move someone else in to the Property or wants to add another co-owner (if possible). What if someone wants to move their partner, husband or wife in? Who gets priority if there isn’t room for everyone to have a second person in the Property?
- You will all be ‘jointly and severally liable’ to any mortgage lender, meaning that if one or more of you stop paying, they can technically enforce the whole debt against just one person.
- There are little legal safeguards in the event someone leaves, taking their capital with them. Perhaps a Declaration of Trust can help or if mortgaged, the affordability criterion of lenders;
This list is not exhaustive in any way; I would strongly advise that you seek the advice of a trusted property lawyer here at Ison Harrison before you proceed. For more information, call 01904 917 982 or email ashley.mallett@isonharrison.co.uk.
