Buy your first home with friends or family

Buy your first home with friends and family

Getting into your first home is not easy. How about thinking outside the square to get on the property ladder and join forces with friends and family.

I did this myself did this 10 years ago, faced with the same conflict most first home buyers experience I could not afford a reasonable home. I realised that better value would be found by considering locations outside of my preferred area, and to make my money go further I bought my first home 50/50 with a friend. At first we rented two spare rooms in the house and put that income straight on the mortgage.

After 3 years I bought my friend out and still rented one of the spare rooms for a while.

It pays off over time

Over time my mortgage payments have reduced and my house has increased in value. If I had stayed renting the rent would have gone up and up and up…

An agreement drawn up by a solicitor is a must, one that covers the purchase; the mortgage; maintenance; the intention of the purchase; who is responsible for what; what happens if one of you wants to move on; what happens if one of the group fails to pay their share of the mortgage (or rates, insurance and the like); who gets what when the property is sold and; a method for resolving any disputes.

Andrew King, of the New Zealand Property Investors Federation, said sharing a mortgage had its fair share of risks and benefits.

“At this point prices are going up faster than people can save, so it is a good way of getting into the market.” But, even if you are sharing the mortgage, you are still liable for all of it.”

Keep in mind there is nothing more sure to divide friends and family than money, so start planning and talking honestly and discuss contingencies: what will you do if things don’t work out?

Further reading:

Buying property with family and friends
Pros and Cons buying with others
Buying a first home with friends