To think buying a house with a friend is a bad idea?

[lottielou7]

I understand why people do it given that usually one person won't earn enough alone to buy a house. But you'd be tied, financially to that person whom you might not actually want to spend the rest of your life with. If my daughter did this I think I would be concerned.

DH and I did this with another couple with two rental properties.

The first one was great but we had to sell it when they needed extra cash. It was a fucking gold mine and I wish we could have been able to keep it alone.

The second one is a bloody millstone. It's an expensive disaster and we can't afford to get rid of it. The DH of the other couple may go bankrupt now too.

I would never, ever do it again and wish I had listened to myself. I knew the second property was an awful idea.

That's the scenario next door to me- three lads bought the house together, then over the years one of them bought the other two out as they decided to move on for whatever reason, and now he has lodgers to cover the mortgage.

It seems to have worked for them, but I can see there's a lot of potential for it to go badly wrong!

I think that in an ideal world everyone would be able to buy a property independently. However, this isn't the case and I actually think friendships are more likely to last a lifetime than romantic relationships. Obviously you would need to be careful about which friend you chose but with the proper legal protection in place I think it can be a good idea.

I think it's possible to do it; but equally it's possible that everything could go tits up with not really very much provocation. So if you were thinking of it, it would be important to get it all drawn up properly by a solicitor.

Lurking - I don't know exactly when in the 80s you were looking at endowment policies, but certainly in the late 80s/early 90s the funds were doing pretty well, at interest rates of 12-15% - but of course they dropped dramatically over the following years. However, people should have realised, as they were told by proper advisors, that interest rates could go down (and did). Having an endowment policy worked for me because I was able to get a 21y mortgage on the property I bought by myself, after splitting up with my ex, instead of a new 25y mortgage. But yes, nothing in this world is perfect - it became very clear a few years ago that the funds weren't going to perform to target, so I took steps to ensure I'd be covered.

I have two sets of friends who did it. First set worked fine, with a few bumps here and there. Essentially worked as described, one wanted to move out/away so got a lodger in to cover rent. Remaining person now looking to move out so they are considering whether to sell up or rent it out.

Other one was a complete disaster. Mainly because one person was seeing it completely as a business proposition, so insisted on selling when the market was bad and the other had nowhere to move to. Then changed her mind, but insisted that remaining person's partner (who was happy to move in) pay market rent rather than covering half of the mortgage. It was all handled horribly badly and they can't even be in the same room as each other anymore.

A couple of friends of mine did it. Worked fine at first, but then one moved out and rented his room out to a lodger. The other one aquired himeself a wife and child and the house was a bit crowded, so wasn't working as well. The wife didn't really get on with the lodger, but they couldn't afford the mortgage without his contribution.

Might have worked better if the wife had had a better paid job and more time before the child was born - then maybe they could have bought the other person out. So I think it's hard to tell what will happen in the future.

House prices went up a lot whilst they owed the house though so I think they were all glad they had bought half a house rather than just stayed renting.

A couple of friends of mine did it. Worked fine at first, but then one moved out and rented his room out to a lodger. The other one aquired himeself a wife and child and the house was a bit crowded, so wasn't working as well. The wife didn't really get on with the lodger, but they couldn't afford the mortgage without his contribution

incamt believe a lodger would want to stay in a house when it moved form sharing with one guy, to sharing with s guy and his new wife and baby!

Disaster all round. they should have sold once it became clear they wanted to live as a family unit and couldn't afford to live in the house on their own.

I think this only really works if you aren't really struggling financially to pay your half anyway. You need some cushion.

I think it could work but a lot of care needs to be taken and in all the cases that I knew of among my friends in late 80s and 90s, although people got out of the arrangements, they were all more difficult than anyone had expected - though I'm inclined to think that in at least one case it was because they simply hadn't agreed a clear exit strategy in advance when they could and should have done so.

In that case one of them had provided a higher deposit and one of them had taken a larger share of the mortgage and when they sold they had big disagreements about how to share the costs of sale and the increased value of the property. But that said, it still gave each of them a bit of a push on the property ladder (can't remember if the friendship survived).

On endowment mortgages - they had done well for my parents so in principle I knew they could be ok, but in actual fact I asked a lot of questions from my mortgage lender about possible shortfalls and got very hazy answers which struck me as suspicious but (and my own fault here) I just couldn't believe that I'd be actively misled (by the mortgage lender of the year no less), so I took the endowment option. It was ok in the end because when it became clear there was a problem I was able to switch to repayment and it was quite straightforward.

I'm in the process of doing it right now! I am not 22 and taking my first step on the housing ladder. I'm 40 and I'm doing it because I don't want to live alone any more, and my quality of life will be better when I do it. The model of "one life partner until we die, kids and a house" is rare for most people nowadays. I find it strange that households coming together in different ways still raises eyebrows and worries. (And yes, there are exit strategies for all circumstances and a proper contract!)

Yes, Hawthorn - that's what I did too, well switched my mortgage to half repayment, half interest only. My first endowment policy matures this year and although it hasn't quite made it's projected amount, it has made considerably more than I was expecting (I'd taken a very pessimistic view of it making only half of what it should) and so I will actually have some money left over, which is nice. :)

Loads of my friends did this in the 80s and early 90s with mixed results. One bought with a friend in London. Lived there for 3 years and sold at enough profit for them both to buy a place on their own. Another got stuffed when so called friend stopped paying and the place got repossessed

I would do it if you can be responsible for only your 50% of the mortgage. I would first check if the other party stopped paying how would that affect your credit rating. It is potentially a great way to get on the property ladder. Paying rent is a waste of money. Dh and I now own 4 rental properties, these are our retirement nest egg. We started with a very small starter home, never sold it, rented it out and bought another to live in etc. We remortgaged to buy more as the market rose. Most tenants move out to buy their own home. Good on them.

It's a terrible idea. DH and I will never be able to own our own home thanks to the fact he did this.

The other person moved in a partner and they proceeded to have children. DH had to move out. The other person split from partner and couldn't keep up the mortgage. DH and I couldn't afford it either. His credit rating is beyond repair, he is thousands in debt and he is going to have to go bankrupt. We are potentially never going to be able to have children as a result either. All for something that happened before I even knew he existed

Please don't do it.

If there are clear plans in place for how long they expect to keep the house etc and the agreement is drawn up by a solicitor outlining what happens in the event of A, B or C it should be fine.

It was one of the options I had when after graduating. I looked at quite a few houses in SE London with a friend. In those days, estate agents could also sell mortgages, and after the 3rd agent had extolled the virtues of endowment mortgages my friend and I retired to a pub and looked over the leaflets. 20 minutes later we agreed endowment mortgages were risky as hell and no way to buy a house. Which makes me wonder quite how "missold" people were, if a couple of 21 year old students could spot the flaw

Lurkingdad - this made me smile. I also bought with a friend in the 80s - in SE London. We were so sick of estate agents pushing endowments at us that, out of sheer bloodymindedness we went for a straight repayment. I'm not sure if we appreciated the risk inherent in endowments but we did realise that the estate agents were on commission so they weren't giving us unbiased advice!

Worked out fine for us. Though she was/is my best friend and we'd shared flats at university. After a few years she decided she wanted to have her own place (I don't think she was too keen on my then boyfriend). No great dramas and I had enough deposit for my own flat.

Re endowment policies, ours worked well for us. If you look at it as a means of paying your life insurance that you are required to have if you have a mortgage. At the end of the term you get all the money you paid in back.

It's maybe not a bad idea for people who individually have tiny deposits but who both have good potential for income growth. Obviously more to go wrong than if buying individually.

Bad idea.

Your credit file would be connected, and if they later get themselves in debt, that could screw up your whole future too e.g. if you wanted to get a mortgage with someone else someday, such as a future partner because you would be seen as financially connected to this friend.

Could affect future relationships e.g. if one or both of you get a partner. And tbh I don't think it's ever a good idea to mix money/bills with friendship.

However if you do choose to do it, seek legal advice and make sure you own the property as tenants in common. That way you can either assign your share of the house to someone in your will or your share of the house will pass on to a relative under the intestacy rules. It also protects your financial interests, for example if there's ever a dispute over who owns what and who put the most money in etc.

I did in the 80s; it was a disaster. My 'friend' bailed after a year when the property had increased 25% in value. I could barely afford to buy her out. Then property prices plummeted and I was left with negative equity. My experience is obviously not universal but I wouldn't recommend it unless you are family.

The other person moved in a partner and they proceeded to have children. DH had to move out. The other person split from partner and couldn't keep up the mortgage. DH and I couldn't afford it either. His credit rating is beyond repair, he is thousands in debt and he is going to have to go bankrupt.

Why didn't they just sell it? Why did your DH just move out and not force a sale?

My 'friend' bailed after a year when the property had increased 25% in value. I could barely afford to buy her out. Then property prices plummeted and I was left with negative equity

What was your agreement regarding length of ownership? It's typical to say that neither can force a sale before a certain amount of time, no obligation to buy the other party out, etc etc

Bad idea unless you have everything written out to the most detailed thing like who would be able to stay at the place on which days OR the place is absolutely only for renting purposes. I would recommend against it unless everything is in a contract and signed. You never want to be caught off guard when it comes to property.

I did it in my mid 20s with a friend I had known for 20 yrs. We bought a 3 bed and rented out the 3rd room to another friend for extra income. My friend wanted to move away after 3 years so I bought her out - in the days when they were handing out mortgages willy nilly! I was only on 18.5k and got an interest only mortgage for 100k! We had both already had 10k out each so didn't have to pay out much more.

I had a couple of lodgers until I moved in with a bf and rented the whole house out. When that relationship ended I moved in with my parents for a year, saved up some money then moved back into the house with now dh and have been here for 6 years. Although we've not paid any of the mortgage off we have savings to do so in the next few years plus about 20k in equity. Because of low interest rates I've always paid much less than market rate

Rent.

Still good friends and have a house I couldn't afford otherwise so success story here!

Also, once I had bought my friend out we contacted Experian to make sure there was no longer any connection for credit purposes. The main thing is to have trust on both sides