There are lots of reasons you might consider buying a home with somebody else. Perhaps, like many first-time buyers, you are a married couple looking for a place to raise a family. Or perhaps you’re buying a home with your parents. So, what should you be taking into consideration when you look to buy a home with someone else?
What's Included?
Are you both first-time buyers?
First thing to consider: Are you both first-time buyers? It seems like a strange question. However, many people don’t realise they don’t fall under the eligibility requirements for a first-time buyer.
The Government defines a first-time buyer as ‘A person who does not own and has never owned any interest in land, either in the United Kingdom or elsewhere’. Both of you must fall within these criteria to benefit from first-time buyer deals and offers.
If you are buying a home with a parent who owns their own home, most first-time buyer mortgage products will be unavailable to you, though if your parent acts as a guarantor, some of these products will still be available to you.
The pitfalls of a joint mortgage in marriage
There is no nice way of saying this – are you sure you’ll stay together for the lifetime of the mortgage? As many as 42% of marriages in England and Wales end in divorce. Before you consider buying a house with someone else, be at least reasonably sure that you will both maintain responsibility for that mortgage for its lifetime.
If you do divorce, things can get messy. For starters, you need to keep paying the mortgage – even if one or both of you move out of the house. When you take out a mortgage, you agree to accept liability for the mortgage, even if you and your partner split up. If you don’t pay up, it will cause problems for your mortgage history.
Now, nobody knows for sure if their marriage really will be ‘happily ever after’, and the banks understand this. If you find that things aren’t working out, you can ask the bank to put your repayments on hold while you sort things out.
What options do I have if my marriage ends in divorce?
It depends on the specific circumstances. You could just keep paying it off jointly, even if one or both of you no longer live in the house. This is especially suitable if the marriage ends on amicable terms or the mortgage is near to being paid off.
On the other hand, if the divorce is more bitter, it might be better to sell the house. However, this presents its own challenges – you’ll need to work out with your solicitors who gets what as a result of the sale. In a worst-case scenario, this can even go to court.
Alternatively, one can keep the house by buying their former partner’s share in the property. This requires some legal wrangling, because the other partner is entitled to a share of the equity.
After this, the house can be remortgaged, leaving just one partner responsible for the whole mortgage. Remember, however, that one partner will be left responsible for insurance costs, bills, and so on.
Taking out a joint mortgage with a parent or guardian
We’ve got an article about this which you can find here.
A joint mortgage with your parent or guardian is similar to that between a married couple, albeit without the issue of divorce. Both of you pay into the mortgage and both of you own the house. This is the case even if only the child lives there. And of course, both of you take responsibility for the mortgage. So if you fail to make repayments, your home will be repossessed.
There are also joint borrower sole proprietor mortgages, or JBSP. This means the child gets the title deed to the property. The property is in their name, even if both parent and child pay into it. With these mortgages, only the child takes responsibility for stamp duty, not the parent.
Again, it’s best to only do this if you know you and your parents can remain on good terms for the life of the mortgage.
Financial woes can cause serious and lasting harm to family relationships. In particular, if you are gay, queer, or trans, and your parents are unaware or disapprove, you may wish to look for other options.
Final thoughts
Some people take out a joint mortgage with platonic friends. Others might take out mortgages with siblings or cousins.
In any case, it’s a good idea to be sure that both parties can keep up repayments for its lifetime.
While not impossible, and certainly not without caveats, it’s very difficult to get out of a mortgage once you’re in one.
At the end of the day: Always be sure when entering any sort of joint contractual agreement that you will both be able to keep up your end of the deal.
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