Snagging a house is tougher than ever. High interest rates and rising house prices make solo purchases a distant dream for many. But in today’s Telegraph Phil Spencer, a property guru, suggests a compelling alternative: why not buy a home with friends or family?
The aftermath of the global financial crash has left us with interest rates that echo the economic turbulence of those times, currently standing at an average two-year fixed-rate mortgage of 5.92%, nearly reaching last year’s peak of 6.66%—the highest in 15 years. Meanwhile, house prices are not showing any signs of sympathy; they’re expected to climb by over £60,000 in the next five years, according to estimates from estate agent Savills.
The Power of Partnership
Faced with these daunting figures, buying alone seems increasingly out of reach. However, teaming up with firends or siblings, a less conventional but growing trend, offers a viable solution. This approach isn’t just about pooling resources for a bigger deposit or affording a nicer area; it’s also about shared long-term financial responsibilities, which can ease the burden considerably.
Phil Spencer notes the emotional and financial support that often comes from parents, dubbed ‘the bank of mum and dad’, which plays a significant role. In recent years, over half of under-35 homeowners received help from family, with contributions totaling a whopping £8.1 billion.
Setting the Rules with a Co-Ownership Agreement
Despite the familial bonds, Spencer stresses the importance of formalising the arrangement through a co-ownership agreement. This legal document outlines each party’s rights and responsibilities, covering everything from ownership percentages to the split of expenses. Such an agreement is crucial, especially when contributions to deposits and mortgages differ, to clearly define how any future property value changes are handled.
Buying with Friends
Buying property with friends is another path that’s gaining traction. This option might carry a bit of skepticism due to its unconventional nature, but it has its merits. Purchasing a home with someone you’ve known for years, like a childhood friend, can offer more stability than rushing into a commitment with a romantic partner.
Friendships often come with a deep understanding of each other’s quirks, providing a strong foundation for shared homeownership. However, it’s vital to plan for potential changes, such as one party wanting to move out or sell their share.
Financial Implications and Legal Considerations
Whether buying with siblings or friends, understanding each other’s financial habits and future plans is crucial. If one co-owner fails to meet their mortgage obligations, it could jeopardise the entire arrangement. Employing individual legal counsel can help navigate these complex waters and determine the best ownership structure—be it joint tenants or tenants in common, where shares of the property can differ based on contribution levels.
Innovations in Mortgage Solutions
Recognising the changing dynamics of homeownership, some lenders are adapting too. For example, Generation H now offers a mortgage product that accommodates up to six incomes and four names on the deed, with additional support from two other contributors. This kind of innovation shows a market adjusting to new buyer needs, making room for more inclusive financing options.
Be Prepared
Phil Spencer’s parting advice is clear: the joy of buying your first home is undiminished by the means through which it is achieved. However, ensuring all agreements are meticulously documented can safeguard this significant life investment, no matter how you choose to make it.
While the traditional route of solo homeownership becomes more challenging, buying with friends or siblings not only opens the door to new possibilities but also enriches the journey with shared experiences and responsibilities. So, why not consider this innovative approach to stepping onto the property ladder?