Buying a house: Getting a mortgage with a friend.

Type of ownership agreement

When buying a property with someone else, you’ll need to decide how ownership will be set up.

Joint tenants

As joint tenants, you’ll both own equal shares of the property, and if one of you passes away, the other automatically inherits their share.

Tenants in common

Tenants in common means each person will own a specific share of the property, and these shares can be different sizes. This is useful if one person puts in more money for the deposit or wants a larger ownership share. If you choose this option, your share will go to your estate instead of your co-owner if you pass away.   However, all owners are still individually liable for the full monthly mortgage payment to the lender if any of the others default.

To avoid confusion, it’s best to hire a solicitor to create a legal agreement. This document will clearly outline everyone's shares and responsibilities.

Credit checks and affordability

When applying for a mortgage together, lenders will assess both your credit histories and incomes. If one person has a lower credit score, it could affect the terms—or even the approval—of the mortgage.

It’s a good idea to review your credit reports ahead of applying and resolve any issues to improve your chances of securing better rates. Lenders will also check your existing financial commitments, like loans or credit cards, to ensure the mortgage is affordable.

Deposit and contributions

You’ll need to agree on how much each person will contribute to the deposit and other upfront costs, such as surveys or legal fees. If one of you is contributing more, this should be reflected in your legal agreement. Pooling your savings into a shared account can make managing these costs simpler and more transparent.

Choosing the right mortgage

A joint mortgage is the most common option for buying a home with someone else. By combining your incomes, you may be able to borrow more than either of you could on your own.

When choosing a mortgage, consider whether a fixed-rate or variable-rate deal suits your circumstances. L&C’s mortgage comparison tools and expert advisors can help you find the best deal for your situation.

Lenders that allow multiple joint owners

Some lenders allow up to four people to apply for a joint mortgage together, making it an option for groups of friends or family. However, not all lenders will take everyone’s income into account when calculating affordability.

If you’re buying as a group, it’s important to agree on ownership shares, contributions, and responsibilities from the outset. A solicitor can help you create a legal agreement to protect everyone involved.

Responsibility for repayments

Everyone named on a joint mortgage is jointly and severally liable for the repayments. This means if one person can’t pay, the others must cover the shortfall. Missed payments will impact all parties’ credit scores, even if only one person is at fault.

Discuss how you’ll handle unexpected financial challenges and include these plans in a written agreement to avoid complications.

Exit strategies

It’s important to plan for what will happen if one person wants to move out or sell their share. You might agree to sell the property or let the remaining owner(s) buy out the departing person’s share.

Having an exit strategy in place from the start can save time and reduce stress later. Be sure to include this in any legal agreements you draw up.

The importance of getting legal advice

When buying a home with someone else, seeking legal advice is crucial. A solicitor can help you draft a legal agreement to clarify everyone’s rights and responsibilities. This will protect your interests and prevent misunderstandings.

Benefits of joint mortgages

• Combining incomes makes it easier to borrow a larger amount, while having a joint mortgage reduces overall costs.
• Sharing expenses, such as maintenance and legal fees, can also ease the financial burden.

These options can be particularly helpful in high-cost areas where homeownership might otherwise be out of reach.

Potential risks of getting a mortgage with your friends

Buying a home with someone else does come with risks. Financial struggles, disagreements over contributions, or personal changes can make things complicated. Since all parties are equally responsible for the mortgage repayments, one person’s difficulties could impact everyone.

Careful planning, open communication, and clear agreements can help manage these risks effectively.

Use L&C

If you’re considering a joint mortgage or buying with multiple friends, our expert advice can guide you through the process. Speak to L&C today for fee free advice and compare mortgage deals to find the best option for your situation.

‍