Is this a good or a bad idea? Friend and mortgage

[Fantasisa]

DH and I are divorcing. I can't get a big enough mortgage to buy by myself and a very close friend has suggested for us to buy a properly together where I live that only I would live in. We would both put down the deposit.

The mortgage would be roughly the same as rent would be so it seems like I could pay that by myself while she continues to rent where she lives. She has been considering buying a BTL property somewhere anyway and has suggested this option.

The big issue I can see is if her circumstances change and she suddenly needs her money back or wants to come off the mortgage and then I'd be stuck. But hopefully by then I could remortgage to free up some equity to repay her.

Is this a good solution or a stupid idea?

@Palavah It could take 5-10 years to be able to remortgage I suppose.

In this situation your friend stands to make quite a tidy profit whilst you pay off the mortgage and maintain the house.

Which is the same as a shared equity arrangement, except this way I'm not paying rent on top of the mortgage.

@Fantasisa

How long were you on it for *@SimonJT*?

Good to hear it worked well.

I could also start saving up from day one to pay her back but that will take a very long time with two DC to pay for too.

Four years, it worked for us as I could still afford to buy my own property. You do need proper legal advice so if you go ahead with the deal noone can back out when it comes to returning money.

Yes definitely. I think she is more at risk on that front and I would want to be sure we were both protected.

It is daft really as rent around here would cost the same as the mortgage so I would have to pay that to house me and the DC with no investment for the future to show for it.

Have you discussed that timeframe with her? Could you take in a lodger if you needed extra income to make it work?

No discussion about timeframe. And this may all come to nothing, it is very early days in the divorcing discussion with 'D' H and my df suggested it as a solution.

The absolute ideal would to be able to buy on my own but I realise that asking anyone to be a guarantor is a huge risk to them and a big imposition.

I couldn't take in a lodger as I have two DC and it is only a two bed place.

Would your friend class as a first time buyer? Is she sacrificing her chance at a stamp duty free home to buy in with you (who I assume already have bought a house in the past).

Anything with money and friends usually ends up in tears in my experience OP.

You need to make sure you are both on the same page with absolutely everything and that everything is drafted up legally beforehand, so that everyone is going in with their eyes open and is happy with what they are signing into.

Hmm agree that it could work but you need to see a solicitor!
I knew a couple who joined with a friend to buy a house (between the three of them). I think it worked quite well as the third guy was in the army and just wanted an investment.

@RedCatBlueCat - hmm good question. She owned a house in the past with an ex, now sold, so not sure she still classes as a first time buyer or not.

Maybe a legally binding loan would be better and I get the rest on a mortgage by myself? Not sure if that would add up to enough though and she would be waiting a very long time to get her money back via a loan from me with no chance of it being a proper investment.

Shouldn't you be able to negotiate a settlement in the divorce to enable you to achieve a mortgage though? That should be your first port of call.

Hi OP

You'd both need to be clear in how the costs of repairs and maintenance to the property including things like the garden, boiler, updated kitchen, bathroom etc and how this would be paid for/recovered once you go your own ways.

Would, for example, the costs of these be deducted from the equity for both of you before each of you taking your relative percentage amounts and your deposits?

What about the cost for house insurance? You and your children would be living there, but it's your friend's asset too, and she need to be protected on case if any structural or other serious damage. What about Capital Gains Tax?

Also read up on "Declaration of Trust" or "Deed of Trust" which is a legal document setting out your (plural) agreement on how the how this process would work.

I know you are discussing this with a close friend, but best for you both to get the legalities sorted out as clearly as possible to avoid any future disagreements. Sorry to be doomy and gloomy - what would happen to the property if one of you died?

Hope this works out for you. 🌹

I've done this in the past. For is both to benefit from the house purchase and subsequent rise in value we both put in 50% deposit [and half of solicitors fees etc each] and both paid 50% of the mortgage and bills in order to maintain the investment. We sold up and profit was shared equally.

If you put in 50% deposit and paying all the mortgage this is very unbalanced and instead of being joint tenants you would be tenants in common and the % split legally noted. Sounds like that would be 75% for you and 25% for her....if I'm right. A solicitor could tell you.

Don't forget property prices can fall too,, and these are uncertain times. To be stuck in negative equity if the other party wants to sell up would be a very bad scenario for you.

@Happynow001 and @bluebird243 - thank you for your posts. Negative equity would be a disaster and yes, we would have to both instruct solicitors.

@OliviaBenson unfortunately this is all based on the proviso that I can access my share of the equity in the house DH and I currently own. It is part of the reason we have muddled on for so long - neither of us can afford a house around here without each other. I'm also not sure what he will do regarding housing.

Lots to think about.

If you do go ahead then you need to agree what would happen in all scenarios. Challenging questions such as what if you lose your job and the property gets repossed, or what happens if one of you dies and the executors want the money fast. I looked into buying with a friend in my 20's and eventually decided against it because too many pitfalls/life changing events. Now I have kids with so and they are stil in the lovely flat they bought instead. Not sure our friendship would have been the same if i wanted to sell and they didn't. Not impossible, or terrible to do, just be prepared.

So many complications, that's for sure. I guess we would make wills/have life insurance to cover us both in the event of a death. My job is as secure as any job could be at the moment but you can never tell. Hers is less secure but she is a high earner and I get the impression she saves for a rainy day.

This sounds more like an equity release scheme.

She is effectively lending You a deposit but is claiming half the equity should you decide to sell.

You need a water tight agreement, especially as she could at any point force the sale.

For me it is more about having her name on the mortgage so the bank will lend me what I need. I think I could do the deposit bit by myself (if DH agrees to sell/give me half of the equity).

I don’t know how a mortgage provider would view this scenario as the deposit would be coming from someone who isn’t living in the property. Also your friend will need to pay capital gains tax when the property is sold.