What is co-buying?
Co-buying as it sounds is when two or more people buy a home together. Co-buying could significantly cut down the time to homeownership for you and your co-buyer.With Co-buying you may all put a contribution towards the mortgage deposit and towards the monthly mortgage repayment.
In most cases, you will put together and agree on a pre-purchase agreement which outlines your obligations to each other. For example you might want to decide who should get credit for the mortgage deposit if the relationship ceases and reflect in the title documents the share of ownership or contribution.This makes things significantly easier when you are selling the house as there will be no disputes.The lender will need to be made aware of this and give their consent. The lender will almost likely hold all co-buyers jointly responsible for the mortgage and can come for either or all of you. You should consider this in a scenario one of you passes away.The pre-purchase agreement or template should cover all of this scenarios.
The pre-purchase agreement may also contain information such as who gifted the deposit ...or who loaned the mortgage deposit to who and in this case. The pre-purchase agreement should then contain how much needs to be paid back, to who and when. Will the mortgage deposit loan be a second charge on the property?
Co-buying is either done as a joint tenancy or as Tenancy in common.
Joint tenancy is when you are both jointly liable for the mortgage and both own equal shares in the property. This means you will need each others permissions to sell the property and you will share the proceeds equally. If one of you dies, their share of the property will also go to the other owner.
A tenancy in common will likely be a preferred method for most co-buyers as it allows either party to sell their shares of the property at any time or leave it in a will to their loved ones.
A tenancy in common will also allow the co-buyers to enter into a declarations of trust agreement where they could go into more specifics on a case by case basis.
Pros of co-buying a property
Co-buying will allow you to own a bigger and better home..which are usually the more expensive homes.
Co-buying will cut down your timeline to the property ladder
Co-buying can be done with mortgage schemes such as the shared ownership scheme, this means you don't even have to buy the whole home, just 25-75% at first then you can take on a staircase mortgage and buy the rest of the home in different stages.
If you buy your property without a government scheme, you will be able to rent it out or sell it without any restrictions.
Co-buying will allow you to get an investment property easier.
Co-buying will allow you to benefit from any price rises
Cons of co-buying a property
A lot of issues can come up with buying a mortgage with someone else but these are people issues rather than issues borne out of the process.
Issues such as being jointly liable for the mortgage. This means both parties can be chased up even if one of you misses out on their share of the mortgage repayment. This will then reflect badly on both your credit scores.
Although most issues can be rectified with a pre-purchase agreement, the issue mentioned above might be a lot harder to explain and evidence to the credit bureaus.
The best way to avoid any issues with co-buying is to discuss your expectations beforehand.
You can find a co-buyer by joining our homebae network and meet them at our homebae events to assess them properly.