Buying a house with friends explained

When you buy a house with friends, you'll have a bigger deposit and may be able to get on the property ladder faster. But there are some major pitfalls to consider before taking the plunge. We look at everything you need to consider first.

Rebecca Gamble Consumer Journalist

With the average first time buyer deposit soaring to almost £62,500 in 2023, buying a house with friends may seem like an easier way to purchase your first property. But what should you beware of? We take a look.

What are the pros and cons of buying a house with friends?

Before buying a house with friends it’s important to weigh up the pros and cons carefully.

What are the benefits of buying a house with a friend?

• Your deposit will be bigger: With two, or more, of you putting money away towards your house deposits you’ll be able to save a larger amount. A bigger deposit means you can access better mortgage deals, making your mortgage more affordable. Plus, if you and your friends each take out Lifetime ISAs to save for your deposit, you can each put your LISA savings, plus the Government’s 25% bonus on your savings towards the purchase of the house.
• Your budget will be larger: Most lenders will allow up to four applicants to take out a joint mortgage. But when they are deciding the size of your mortgage, they will usually only take into account the incomes of the two people who are paid most. So you may be able to take out a much larger mortgage together than you could on your own.
• Costs will be split: Buying a house is expensive and there are lots of costs of buying a house to factor in, from stamp duty to buying furniture. If you’re buying a house with a friend you’ll be about to split these. Read more in our guide on the Costs of buying a house.

6 Tips for buying a property with friends

However, there are some potential disadvantages too and it’s important to take them seriously. So before buying a house with friends, make sure you plan ahead so you can avoid any pitfalls.

1. Always have a formal agreement when buying a house with friends

Before buying a house with friends you need to establish how much each of you will be contributing to the deposit and to the monthly mortgage payments. Each of you should seek separate independent legal advice and always draw up a legal agreement, called a Deed of Trust.

A Deed of Trust establishes when and how the property can be sold and how much notice needs to be given if one of you decides to end the arrangement, whether one or more of you has the right of first refusal to buy the share of the owner who wants to leave, and how the net sale proceeds should be divided up. See our guide for more detailed advice on a Deed of Trust and the difference between this and a Declaration of Trust.

2. Establish your budget

Work out your budget from the outset. The easiest way to do this is to use our free online mortgage calculator, which will give you an idea of what you may be able to borrow from a mortgage lender. And for more information, read our guide How much can I afford to borrow on a mortgage?

3. Discuss your finances with your friends

When buying a house with friends, it’s vital that each of you is up front about your financial situation. This is important for a number of reasons. When you take out a joint mortgage, you are all equally liable for paying it. So you’ll want to make sure the friend you’re hoping to buy a house with is good at managing their money.

Also, when you take out a mortgage with someone else, you become financially associated with them. This means that their credit history may be taken into account when you apply for credit in the future. So make sure you’re happy before going ahead. And if you want to boost your credit score, read our guide 11 tips to improve your credit score for a mortgage.

4. Open a joint account

It’s a good idea to open a joint account that you use for your mortgage payments, bills and house costs when buying a house with friends. This means you won’t lose track of who has paid what.

5. Keep an inventory

Also, it’s advisable to keep a list of who bought what, whether it’s the TV or a sofa, to help you split your possessions when or if you sell the house later down the line.

6. Make a will

If you buy with friends on a ‘tenants in common’ basis (read on for more on this), it’s important each of you has a will in place. This will determine what happens to your share of the property should you pass away.

Get mortgage advice and find out how much you can borrow when you buy a house with friends by speaking to our fee-free mortgage partners at L&C.

How to buy a house with friends

If you’ve weighed up the pros and cons and decided that buying a house with friends is the right option for you, here’s how to go about it.

Firstly, can you buy a house with a friend?

Yes. Up to four people can jointly be registered as legal co-owners of a property. Joint owners have a legal right to stay in their home unless a court order rules otherwise.

If one of the owners wants to sell the property or take a loan out against its value, all of the owners have to give their consent, unless a court order rules otherwise.

Which is better, joint tenancy or tenancy in common?

You’ll need to consider the different options for joint ownership. There are joint tenancies, which are favoured by married couples and people in civil partnerships. And there is tenancy in common, which is favoured by groups of friends or relatives who are buying together:

• Joint tenants: If a joint tenant dies, the property immediately passes to the other owner. So individual owners can’t pass what they think of as ‘their share’ of the property to a beneficiary in their will. Unless the co-owners are married or in a civil partnership, inheritance tax may still be payable.
• Tenants in common: Up to four people can be tenants in common for an individual property and tenants in common don’t have to own equal shares of the property. They can each act individually, which means they can leave their share to a beneficiary in their will. In theory they have the option of mortgaging their share of the property, however, it’s unlikely that a lender would lend in these circumstances.

Can tenants in common take out a joint mortgage?

Yes, most lenders will allow up to four applicants to take out a joint mortgage. Although, when calculating the mortgage amount they will lend you, lenders will usually only take into account the incomes of the two people who are paid most. However, the lender will look at the finances of all the applicants when you buy a house with friends so one person’s poor credit history or high levels of debt could affect how much you’re able to borrow.

When you’re getting a mortgage to buy a house with friends, you’ll also need to consider the type of mortgage you want to take out. Do you want a fixed rate or a variable rate mortgage? Do you want a 2, 3, or 5 year deal – or even longer?

Find out how much you can borrow when you buy a house with friends and the best type of mortgage for you by speaking to our fee-free mortgage partners at L&C.

What happens if I’m a joint tenant or a tenant in common and the other tenants stop meeting the mortgage payments?

A mortgage lender will always insist that borrowers are ‘jointly and severally’ liable. This means that if one of you stops paying his or her part of the mortgage the other (or others) will have to pay the full amount.

So it’s crucial that you understand this and are happy with this before you proceed. Have a serious discussion with your friends before taking the plunge and buying a house together. Perhaps one of you wants to move in with a partner eventually, or maybe one of you has to move around with work and it wouldn’t be realistic to enter into a long-term legal arrangement and commitment.

What do I need to know about the legal side of buying a house with friends?

When buying a house with a friend it’s vital that you have a good conveyancer who can advise you on all aspects of the purchase. They may also be able to draw up a Deed of Trust at the same time as doing the legal work on the house purchase. To find the right conveyancer at the right price, read our guide on How to find the right solicitor or conveyancer and be sure to compare conveyancing quotes:

This all sounds a bit risky – what are the alternatives to buying a house with a friend?

If there are too many potential pitfalls for you to consider buying a house with friends, there are a number of different alternatives you may wish to consider including:

• Can you buy a house alone? Don’t assume you won’t be able to buy a house on your own without investigating it properly first. The average first time buyer deposit in 2023 may be almost £62,500 according to Halifax. But that’s just the average – it doesn’t mean you’ll need to save up that much. Speak to a fee-free mortgage broker, they’ll run through your finances and give you an idea of how much you may be able to borrow on a mortgage.
• Is a 100% mortgage an option? If the deposit is the main hurdle and you have a track-record of paying rent, then this may be worth exploring. See our guide to getting a mortgage with no deposit.
• Is Shared Ownership the answer? Shared ownership allows you to partly own a property without having to involve your friends or loved ones.
• Is a Guarantor Mortgage an option? With a guarantor mortgage someone, usually a parent, will take on some of the risk of the mortgage by acting as a guarantor. This means the borrower can take out a larger mortgage than if they apply for a traditional mortgage on their own, sometimes 100% of the property’s value. Find out more in our guide about this option in our guide Guarantor Mortgages Explained.
• Can you get help from your parents? If your parents are in a position to, there are a number of ways they can help to make buying a house more affordable. See our guide: Bank of Mum & Dad – How to help your child buy a home.

For more information on these and other ways you may be able to buy your own home, read our guide on What will replace Help to Buy?

Frequently Asked Questions