Pros and Cons of Buying a House with Friends
Many people struggle to get a mortgage application approved. Reasons include skyrocketing house prices, the difficulty of saving a large deposit, and poor credit scores. Despite these obstacles, if you are really determined it may still be possible to buy a property with friends. But take note, there are risks involved.
Pros of buying a house with friends
Most lenders will require a deposit of at least 20% of the property value. So if you’re looking to buy a $350,000 house, the deposit you’ll need is $70,000. If you find it too difficult to save, then you can save the deposit with a friend. This will let you own the property sooner.
The initial cost of a mortgage can be hefty. There’s stamp duty, conveyancing fees and inspection fees among other things that you need to pay for. The initial expenses can be hard to shoulder when handled alone, but with joint ownership, you can split them in half.
Moreover, mortgage repayments will be shared as well as utility bills and other monthly expenses such as maintenance and repairs. Sharing the expenses for the house can help decrease the financial burden.
Cons of buying a house with friends
While being able to own a property sooner is a huge benefit when buying a property with friends it also comes with disadvantages. One of these is exposing yourself to the risk of your friend defaulting on the loan.
If he or she cannot make the loan repayments, you’re responsible for paying off the loan. You can sell the house or refinance, but this can take months to accomplish and sometimes it can cost you.
Unexpected events may happen such as a loss of employment, or health expenses. If this is the case, if your friend can’t give you his or her share, your credit rating could take a hit because both of your names appear on the mortgage.
Buying a house together is a huge commitment. Make sure that you have a detailed legal agreement to avoid confusion.