Stepping onto the property ladder can feel like hard work. You need a big deposit saved, a steady salary and good credit. That’s why it might be time to consider a joint mortgage with your friends.
Grouping together with your friends means you can afford a larger property in a better area, and split the cost of your mortgage and regular bills. It’s like sharing with friends when you rent – except your money goes towards your mortgage, not your landlord’s pocket.
There are many things to consider before you jump into a joint mortgage with friends, however. Take time to consider the points below, and follow the steps carefully, to make sure you’re ready to share a mortgage with friends.
Joint mortgages: the quick lowdown
A joint mortgage is an option if you want to borrow a larger amount than your salary would allow you to as an individual.
Most mortgage lenders allow up to four people on a mortgage agreement. For the purposes of lending, they’ll usually take the two highest salaries into account to determine the amount they’ll offer to lend.
Every person is jointly responsible for the mortgage payments and fees. If someone on the agreement isn’t able to pay, the lender has the right to demand the full payment from the other named borrowers.
The application process for a joint mortgage is the same as an individual mortgage application.
Everyone named on the mortgage will need to satisfy the lender’s individual requirements and meet credit criteria before a borrowing agreement is made.
Rent together first
If it’s possible, live together with your friends for at least six months before you buy a home. This will avoid awkward changes in your situation when you realise that, as much as you love your friends, you just cannot live with their habits.
It also buys you time to get a feel for their long-term commitment to buying a house together. You’ll learn more about their financial habits too, such as if they spend recklessly or like to save their pennies.
Consider your reasons for joint ownership
Before you jump into a joint mortgage, seriously consider your reasons for sharing the cost with friends.
If you’re only sharing a mortgage because it allows you to take on a larger property or make a bigger profit when you sell, this may not be the option for you.
Buying with friends means, inevitably, living with them. If you’re all single when you buy a house, consider what happens when one of you meets someone else. Do they move their partner in? Do they move out?
If you’re buying as two couples, think about how living in such close proximity to others could affect your relationship. There is less privacy to a shared house than buying your own, so would you be better off buying a smaller house with just the two of you?
If you really get along well with your friends, and trust them, then sharing a property can work well. The community living suits many people, adding to their happiness and boosting well-being. The shared living space and access to a wider social circle is an appealing factor for many people looking to buy a house with friends.
Speak to a mortgage adviser first
Before you choose a property or even look at mortgages on the high street, arrange an appointment with a mortgage adviser.
Our advisers are experts ready to answer your questions and help you work out your potential borrowing amount on a joint mortgage before you apply.
A mortgage adviser also has access to rates and lending offers that may not be available on the high street. They’ll have experience with joint mortgages, and be able to advise how to maximise your chances of being accepted for a mortgage with friends, too.
Check everyone’s financial situation
Joint mortgages create a financial link between you and the other people named on the agreement.
Adding someone to your mortgage who doesn’t have a great credit rating could affect your own score.
Before you agree to buy together, make sure everyone checks their credit report and shows you evidence of their summary. You don’t need to see sensitive details, but it’s important to know their score is what they say it is.
Buy as tenants in common
Own your share independently – and proportionately – to everyone else on the mortgage by being tenants in common, instead of joint tenants.
This means you can sell your share to receive a proportionate return on your investment. For example, if you provided 40% of the house deposit and pay 40% of the mortgage, your share will be 40% of the house price, whether it goes up or down in value.
Tenants in common also control their share for inheritance purposes. People buying as joint tenants automatically inherit the other person’s share if they die. Tenants in common can bequeath their share to anyone they wish.
Get a legal agreement signed before you buy
At the very minimum, you’ll need to create a Declaration of Trust for everyone on the mortgage. This makes sure your share of the property goes to your family if you die.
You should also consider creating a witnessed agreement about your duties and responsibilities as tenants in common. For example, the proportionate share of properties, the division of bills, and an inventory of who bought which items of furniture.
You don’t want your friendship to go sour, but it’s important to have these details confirmed in writing just in case something goes wrong.
Set up a joint bank account
You’ll need to set up a joint bank account to satisfy your mortgage lender’s requirements. You’ll need to each pay your share of the mortgage payment into this account ahead of your agreed monthly payment date.
Consider using this, or another joint account, to pay an extra amount into that covers regular bills and leaves some spare for an emergency repairs fund.
Work out your joint house purchase budget for extra costs
When you’re buying a house it’s easy to forget about all of the costs incurred during the process. Make sure you all have a fair share budgeted to pay for conveyancing fees, building surveys and renovation costs.
Even a few cans of paint can soon add up, so it’s important to make sure you’re all contributing a fair proportion to your renovation and furniture budget too!
Make a Will
You already have a Declaration of Trust in place, but make it watertight by creating a Will too. This means you can stipulate exactly who should inherit your portion of the house, and any furniture and assets you’ve paid for, should you die.
What to do when you want out of your joint mortgage
Whether you’ve ended your friendship or simply can’t afford your share of the mortgage any more, It’s possible to get out of a joint mortgage.
This is, however, a very complicated and often costly process. Before you decide to end your joint mortgage, speak to a mortgage adviser about your options.
Are you interested in learning more about the different types of mortgages available to you? Head to our 'Getting a mortgage' page for a detailed overview.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.