Friends could hold the key
FIRST-TIME buyers who are having difficulty getting onto the housing ladder are being urged by estate agents to consider pooling their finances with friends and family in order to buy their first homes.
With the continued economic downturn preventing many would-be homeowners from raising large deposits from reluctant banks, the National Association of Estate Agents believes buying with family or friends could help to spread the costs of buying and maintaining a home.
The NAEA's latest housing market for October has revealed a month-on-month drop in the level of first-time buyers entering the market, reflecting the worsening economic situation. In October, this important section of the market made up only 20 per cent of overall sales compared with 23 per cent in September – a dip of three per cent.
Mark Hayward, president of the NAEA, said: "This latest data from our October market report shows that the situation for first-time buyers isn't getting better anytime soon. While Government housing schemes such as Firstbuy and Newbuy are in place, they are failing to meet demand, with only 250 people signed up to Newbuy in the first four months of its operation.
"Joint ownership can, in the right circumstances, offer a way of avoiding the high costs associated with buying a property. By splitting the deposit, maintenance fees and mortgage repayments, this could make owning a home a more realistic aim for many would-be first-time buyers.
"It is important to remember, however, that this option requires a lot of trust, transparency and, above all, good planning. With a house likely to be the biggest purchase of a lifetime, there is a real need to view it as a business arrangement to avoid problems after moving in."
For anyone considering a joint-ownership arrangement, the NAEA recommends the following:
Consider your mortgage options – There are mortgages that exist specifically for this type of purchase, so shop around for the best deal. Remember that, with a combined income, it may be possible to attain a mortgage of higher value, giving you greater choice of properties
Think about the worst case scenario – One of the benefits of buying with friends or family should be a high level of trust, but that shouldn't be to the detriment of legalities. Consult lawyers about a legally binding co-ownership contract and agree in advance what will happen if one owner's circumstances change.
Don't forget who owns the television – Drawing up a comprehensive inventory of non-shared items or other costs, and keeping a note of who pays for things like paint, at the start of the shared ownership can reduce confusion months or years down the line. This should also help if one party decides to move out.
Keep paperwork in order – Remember, this is a business transaction, and any paperwork relating to the property or mortgage must be in the names of the co-buyers. Ensure copies are made of all documents associated with the purchase to allow them to be readily accessible to both parties.
Set a realistic timeframe – If you are buying with a friend it is likely that the relationship is, ultimately, temporary.
For this reason, co-ownership should always be treated as an investment decision and buying a house with a good potential resale value makes sound business sense.