Traditionally, home loans and ownership were shared by married couples and protected for both sides by that fact. But, as millennials settle down later and seem keener to branch out without traditional relationships, times are changing.
Most notably, we’re entering the age of home loans between friends rather than lovers. If you’re on the brink of going down this path, though, it’s natural that you have some questions about where you’ll stand/what all this will mean.
After all, homeownership is an extreme undertaking and, while not unusual nowadays, sharing with friends is still something of an unknown. That’s not to say you can’t make this work, but you might want to ask the following before you commit to anything you can’t get out of.
Is your chosen friend reliable for a home loan?
Reliability is a fundamental trait in any home loan partner, especially when sharing with a friend. After all, there’s nothing to stop an unreliable mortgage buddy from leaving you high and dry, or even failing to meet payments.
Check this in advance by renting with said friend for at least six months. As well as showing you what they’re like to live with, this period will reveal a great deal about their money habits, and whether they’ll suit your loan repayment needs.
Do you understand your share?
With married couples, property and other assets are naturally shared, but this isn’t the case with friends. Rather, you need to think about your shares so that you know what you’ll have/what your assets will ultimately amount to. After all, property is a lifelong investment, and understanding the ins and outs is fundamental for everything from house sales through to estate planning. So, get on top of this from the very start.
To do that, consider who’s doing what towards your home loan. If you’re splitting payments right down the middle, then a 50-50 mortgage share is fine. But, if one person is contributing more to down payments or bills, it’s important to seek a ‘tenants in common’ agreement, that ensures you can each gain recompense for exactly what you’ve put in, guaranteed.
What are your plans for the future?
It’s also fundamental that you plan for any future trouble. After all, no one knows what’s coming down the line, and sharing a home with a friend is especially open to change. After all, if one of you meets a partner, this entire arrangement might stop working out. Equally, unforeseeable issues like job loss or illness always put regular payments like these in jeopardy.
Plan for this from day one by talking about what exactly you could do in these situations. Would one of you buy the other out? Would you be willing to split your shares? Or, perhaps you need to put insurance in place to protect your payments in case of lost income?
Also read: What To Do When A Loved One Owes You Money
By taking these steps, and all those mentioned, before you’ve done anything official, you can make 100% certain that this friend is the right mortgage buddy for you.