With so many people struggling to get a foothold on the property ladder, more would-be buyers are exploring alternative arrangements in a bid for home ownership.
In a difficult and expensive market, it can make sense to look at working together to buy a house with family or friends. However, if you decide to buy a property with other parties there can be certain legal implications. That is why it is imperative to seek advice from a specialist conveyancing solicitor if this is the route you decide to take.
Types of home ownership
If you buy a property with somebody else – and this might be with your partner, a parent or best friend – you have a choice about how you own the property. If you set up as joint tenants, this means you have equal rights to the house and it automatically passes to the other person if one of the joint tenants dies.
However, if you are buying a house as a group you may opt for an option known as ‘tenants in common’. With this type of home ownership, there is no automatic inheritance, and each can choose who to leave their share of the home to in their will.
These situations can often get complicated months or even years down the line, especially if conflict should happen. Even if you think ‘it’ll never happen to me/us” it’s well worth seeking professional advice before signing any contracts.
Taking on a mortgage with a guarantor
Of course, there are other options when it comes to accepting the help of other people in order to buy a home. More lenders are offering guarantor mortgages (occasionally these are marketed as 100% mortgages) with a parent often agreeing ultimate liability for the debt.
This is a generous gesture, but the guarantor needs to be aware that if there is any default in mortgage repayments, then they could be exposed to financial risk. This can cause unforeseen rifts between families so again, it’s important that all parties involved seek the proper advice before agreeing to anything.
Parents may also wish to buy into a home with children by taking out a joint mortgage. If they already own a home, there may be additional tax to pay if this is then sold (as the new property may be considered a second home).
Using a parents’ home or other assets as a gift to put towards a deposit may also trigger some unforeseen consequences, so it is always best to seek full advice to allow all parties to make an informed and considered choice.