Property Buying Guide
Joint Ownership, Joint Equity, Co-buying Frequently Asked Questions.
Q: What is joint ownership?
A: Joint ownership is where two or more individuals club together to buy a home. Usually no more than four joint owners are recognised legally.
Q: If I'm considering buying with someone I don't know very well, how do I protect my interests?
A: Joint ownership is an option growing in popularity as people realise that for some, it's the only way to get onto the property ladder. Measures can be put in place to protect you in the form of a trust deed and a co-habitation agreement.
Q: How does joint buying work?
A: When you have found a property to buy, you each pay a lump sum deposit as payment towards the house. 5-10 per cent of the sale price is usual for the deposit. You need not both pay the same amount of deposit. Each joint owner will also pay towards the monthly mortgage. You may want to make different monthly payments. A single payment, a sum of all parties' payments, will go to the mortgage company each month, commonly from a joint bank account.
Q: What happens if one or more of the joint owners wants to sell?
A: When you sell, the amount of money each owner has put into the property is used to determine the proportion of the property owned by each party. You have to ensure that a method of determining who has paid what is built into the trust deed/co-habitation agreement as you may end up having paid for a different proportion on the property than you had at the purchase.
Options are basically:
Sell the property
Agree that one party has the opportunity to buy the other out
One party could sell his share of the property to a third party and a new deed trust and co-habitation agreement could be drawn up.There are a number of websites where you can find potential co-owners, see the list further up this page
One party moves out and lets his room/space to the co-owner or a third party, probably selected by remaining owners (agree this in the co-habitation agreement). A further agreement might be needed depending on circumstances regarding living expenses etc
Q: What happens if someone can't or won't pay the mortgage?
A: If mortgage payments are not kept up, then the money might need to be found from another source, or the mortgage terms altered. You are jointly and severally responsible for making the mortgage payments unless the mortgage lender allows you to change your terms. You can insure against inability to pay a mortgage as your home might be at risk if payments on it are not kept up. Mortgage payment records and bank statements must always be kept in the event of legal action being required.
Q: What about the finances when you sell up?
A: Your trust deed or co-habitation agreement will set out the process under which each owner's share of the final property value can be calculated. Your bank statements from the account from which the mortgage is paid will also show how much each person has paid. The division of any profit made on the sale of the house will also have been agreed in the deed trust/co-habitation agreement. You will need to agree the basis for valuing the property in the event of you not all wanting to sell at the same time.
Q: So what's the co-habitation agreement for?
A: This is a very important contract between all the property buyers. It outlines the conditions under which the living together is undertaken. It is there to prevent misunderstandings and disagreements between all parties in the event of death and other changes in the living arrangements, etc. This covers most eventualities.
Q: How do you know what should be in the trust deed and co-habitation agreement?
A: This guide outlines all aspects that should be considered when your solicitor draws up the agreements for you. Put together your considerations on a checklist to be taken into account by the solicitor when drawing up the relevant legal documentation. He/she will advise you on what is right for you.
Q: What happens if one party wants to buy the other one out?
A: It might be possible to keep the existing mortgage if the lender is agreeable, but the person selling his share would want to make sure that he was released from the mortgage responsibilities.
Find out more about Joint Ownership, Joint Equity and Co-Buying a property in our guide:
What's good about joint ownership? What are the downsides of joint ownership? l How much can we borrow for a joint ownership mortgage? l The two types of joint ownership, joint tenancy and tenants in common l Drawing up a trust deed, or declaration of trust and joint ownership agreement l Example of a declaration of trust l Example of a joint ownership agreement l Joint mortgages and how the finances could work when you buy with others l Finding someone to invest with and tips for those using joint ownership schemes where you can meet other prospective joint owners.
Most useful and most popular pages on this site:
Look for your First Property l Seek First Time Buyer Mortgage Advice l See our Best First Mortgages Comparison Table l Find out about First Time Buyer Mortgages l Find out How to Buy a House l Learn all about The First Time Buyer Mortgage l Shared Ownership
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