buying a property with a friend

The mistake a lot of couples make when purchasing a property together is they look at it as an emotional purchase. They look at their relationship becoming more solid or secure when there is a financial tie. Your significant other is that serious about you that they are willing to share a debt.

The truth is, the financial tie is business, a joint venture. Mortgage payments are made using cash not love. The mortgage lender doesn’t see the same loving relationship you do, they see an account number with two names attached to it. We will get onto the lender shortly. What we are trying to say is that a financial commitment like this should be approached as a business venture. What do you want to achieve from buying a property with your partner? For example

• We have children and I want them to have security
• I want to profit from investing in the property in the future
• I don’t want to keep throwing money away by renting, with no return

The first reason may seem like it has emotion attached to it, but it actually makes business sense. Investing in a property now may financially benefit your children in the long run, whilst at the same time, providing a roof over their head whilst they grow. It makes more business sense than, “We want to show our relationship is serious and we committed to each other”. It’s really important you approach buying a property with your partner with a business hat on because that’s how the mortgage lender thinks.

Do you remember we mentioned earlier that the lender just sees an account number with two names attached to it? The mortgage lender expects payment every month to that account.

The mortgage lender has no interest in your Facebook relationship status, they just want the payment on time every month. If payment is not received, they will hold both parties responsible for missed payment.

So, what happens if something goes wrong...

Your emotional relationship may have ended but your business relationship is very much still intact.

If your mortgage is over a 25-year period and you do not sell the property or at least your share. You could end up in a business relationship with someone that you may not want to ever speak to again for more than two decades.

As we mentioned earlier, the lender does not have any interest in your emotional relationship. Their concern is the monthly payments only, whether you speak to your ex-partner or not is irrelevant as long as one or both are making the full monthly payment.

This part is so important for you to understand. If your ex isn’t paying their share i.e., in the example we used earlier on £1,000 monthly mortgage payment split 50/50, you may end up having to pay their share to avoid the possibility of losing the property.

Any missed or late payments affect both of your credit files not just one of yours.

If you both decide to sell the property and you have been covering your ex’s missed payments, your ex will still be entitled to a share of the profits. Despite the fact the property may have been repossessed if you did not step in to cover the payments.

Now do you understand why this must be approached as a business deal?

You might want to press on ahead with the joint purchase, we are definitely not trying to dissuade you. We are just making sure you understand and approach the commitment correctly.

Like any relationship, assess who you are getting into bed with (pardon the pun). Here are some of the things to consider:

Does your partner spend excessively or has little regard for money? If your partner is a bit reckless with money, there’s a chance that you may have an issue with them paying their share of the mortgage.

If you have a partner who is constantly getting hounded about unpaid mobile phone bills or always has other bill arrears. You cannot expect there not to be an issue with a large outlay like a mortgage payment every month.

Is the debt excessive? Is your partner struggling with those payments? You should never consider adding more debt responsibility to someone who you can see is already finding it tough.

Don’t accept an answer like “it’s ok I can manage £500 per month on a mortgage” it needs to be clear that your partner can. Use our budget planner to see clearly what is affordable for both of you in black and white.

How long have they been employed? Is it full time? If they are self-employed how guaranteed is the income? You don’t want to get into a financial tie with someone who is always leaving or losing their job. It will add more pressure on you.

These are just some considerations before you take this big step, take your time there’s no rush. TRDG is always here in your corner.