Buying a home and getting a mortgage used to be something you did after getting married.
Three-quarters of first-time buyers were still couple households in 2015-16 and this number actually increased since 2005, the Department for Communities and Local Government found, with the proportion of single buyers plummeting.
Yet it’s still possible to buy a home even if you’re single, or not yet in a position to move in with your partner.
If you’re prepared to live with friends or siblings, a mortgage could save you both money on renting and it can set you up financially for when, or if, you do settle down.
Kala Sreedharan of online mortgage broker Habito has seen an increasing number of siblings buying together, whilst M&S Bank found that 60% of those aged 18-35 they polled would be prepared to buy as part of a group.
Sreedharan gave us her tips on buying with a friend or sibling and what to watch out for.
The big mortgage myth
First up, some myth-busting: there’s no difference between buying with a friend or sibling and buying in a couple.
The mortgage provider doesn’t care if you’re married, or if you’re in love – they just want to make sure that you’ll pay back the money you borrow.
If you’re buying with just one sibling or friend, you’ll have the same choice of mortgages as couples and you shouldn’t need to pay any more in interest or set-up fees for a mortgage than a couple would, says Sreedharan.
You'll also be able to combine your deposit savings to get a far larger mortgage then you would by yourself.
Buying in a group of three or more is more complicated, but still possible.
Know what you’re getting into
In financial terms, buying a house with someone is very similar to getting married to them – but without the tax breaks.
That’s because buying a house is itself a huge commitment, cautions Sreedharan, and if one party defaults on payments you’ll all be held responsible:
“Many people might not feel comfortable sharing aspects of their financial history and situation with their friends, but to buy a house with a mortgage, you will need to be totally open and honest about your finances!”
Insist on sharing all your financial details. If your friend or sibling has considerable debt already, missed payments in the past or has just started a job, these could all make a mortgage more expensive, if not impossible to get.
Plus, your credit rating is affected by whoever you are on a mortgage with, making it more difficult for you to get credit cards or other mortgages down the line.
Trust is especially important if you’re using a family guarantor mortgage, where your loved one’s money could be at risk if your friend defaults.
Decide on when you’re going to sell the property, how you will do so and the division of the proceeds, particularly if the deposit wasn’t evenly split between all parties.
A conveyancer or solicitor can help you draw up a declaration of trust (read more about these here), which will help if you run into disputes later.
Buying with more than two people
Buying with a group of people sounds like a great idea – you can get together a bigger deposit and your combined income could allow you to afford more expensive properties.
The problem, explains Sreedharan, is that most lenders will only take into account two incomes, even if other people will be living in the house or even listed as co-owners on the mortgage.
Plus, because lenders are less willing to deal with groups of more than two people, “this will have a knock-on impact on how many mortgages you get to choose from and mean you may pay more in your monthly payment amounts.”
Unfortunately, the math doesn’t always work out: you could end up having to buy a property with multiple bedrooms on the basis of just two incomes and potentially paying a higher interest rate than you would otherwise.
If you’re still determined to buy with a group then talk to a mortgage broker to find you the best deal.
Joint tenancy vs tenants in common
When you apply you’ll be asked to decide whether you want ‘joint tenancy’ or ‘tenants in common’.
Joint tenancy is usually favoured by couples and means that if the house is sold later down the line, all proceeds are split equally.
In the unfortunate event of one passing away, their share automatically goes to the surviving partner
Tenants in common may be a better solution for buying with siblings or friends, because you can choose how you want to split the proceeds and you can do what you want with your share of the mortgage, such as remortgaging it, without having to get everyone’s agreement.
Your conveyancer or solicitor can help provide advice if you’re unsure.
Got a friend or sibling interested in buying with you? The next step is to work out what you can afford.