Property ownership can be a tricky experience for those who are buying for the first time, and can be financially risky as well for the inexperienced. This is why many people are deciding to partner up with friends and start their climb on the property ladder together. And while this isn’t considered the socially typical way of purchasing a property, it does make sense financially for those who are eager to move out but can’t afford a place of their own.
The Benefits of a Shared Household
Living with a friend offers a wide range of great benefits, which range from simple time-saving bonuses to substantial monetary savings. These benefits are why so many financially prudent individuals are choosing to share properties, rather than take on the burdens of property ownership alone. With a few borrowed from Money, some of the benefits are as follows:
- Reduced Expenses: Living in a property costs a substantial amount of money per year in terms of monthly groceries, maintenance and other upkeep costs. However, this total can be dramatically reduced when living with a friend, as both of you can contribute towards the mandatory costs. And although do have to eat the same amount of food and groceries aren’t necessarily cheaper, the associated costs and effort of travelling to the store, preparing and cooking meals, as well as a host of other sharable household expenses, are essentially halved.
- Equally Distributed Chores: Owning a property requires a substantial amount of maintenance, from trimming the lawn to dusting the interior, but theses don’t have to be such a burden when living with a friend. Instead, such chores can be equally distributed, with you and your friend either generating a roster or taking on the responsibilities on a bi-weekly basis. Whichever way you choose to split them, however, owning a property with a friend directly translates to less required effort from either person.
- Faster Mortgage Repayment: Purchasing a property alone can take many years to pay off, which is why most mortgages are drafted to accommodate a 20 year repayment plan. However, the sooner you can pay off the mortgage, the less it ultimately costs you. As such, if both you and a friend are paying off the mortgage, you can repay the total amount sooner, and therefore pay less interest on the loan.
These are just a few of the ways in which owning a property with a friend can benefit you in terms of time, effort and costs saved. However, it may not always be like the dream you imagined, which is why it’s prudent to plan out everything first, in case of complications that could arise later.
The Possible Complications of Living with a Friend
The benefits of purchasing a property and living with a friend are fantastic, but it’s important to remember that it’s not always going to work out perfectly, and there may be some tricky situations that you will be faced with. As such, it’s critical to first plan out everything, from the basic household rules to how you both plan to cover maintenance costs. Additionally, you want to be pedantic at when laying out the rules you wish to set, since you don’t want to regret buying the home with your friend halfway through the mortgage repayments. As Investopedia agrees, while it’s easy to walk out of an agreement when renting an apartment with a friend, purchasing a property typically ties you down for up to 20 years, depending on your mortgage.
Other possible complications of purchasing a property with a friend include:
- Shared Liability: One of the biggest risks of a shared purchase is that both you and your friend will be responsible for the entire mortgage loan. As such, if one of you can’t afford to repay the loan, then the other is responsible for the entirety of the remaining loan.
- Risk to Credit Ratings: Another risk is that if you or your friend is suddenly retrenched, and you both consequently can’t repay the mortgage, then your credit rating can be negatively affected as well.
- Minor Disagreements: Because friendships are more personal than roommate relationships, things can get tricky when either party disagrees on responsibilities or shared costs. And when you are stuck in a long-term investment like a mortgage loan, you want to be sure that you enjoy the company of the one you’re living with.
How to Avoid Disaster – Planning
To avoid disaster when purchasing a property with a friend, it’s important that you acknowledge how difficult it might be. Additionally, the following tips will help you understand whether you are making the right choice, and can offer some contingency in case disaster does strike before the mortgage is repaid.
- Shared Goals & Objectives: It’s important when purchasing a property with a friend to share objectives and goals, as this allows you both to work together towards a shared-interest – such as building equity then purchasing separate properties. This way, even if you have minor disagreements, you can rest assured that neither party is acting against the common goal.
- Get Insurance: One of the best ways to negate the risks of a joint-purchase is to invest in insurance that covers the payments in case you or your friend cannot. This way, both you and your friend are essentially only responsible for 50% of the mortgage, since the other 50% will be covered in case of retrenchment, death or any other unfortunate event.
- Plan Everything First: As boring as it may sound, spend a few hours planning out every last detail. By simply fleshing out your needs, wants and expectations, you can gauge precisely whether you will be able to coexist together.
As you can see, finding a house for salethrough a reputable source like PropertyGuru Malaysia can offer both amazing benefits as well as daunting risks if you are buying with a friend. However, if you are eager to take the time to discuss terms with your friend, and are willing to compromise during trying times, then it may the ideal financialoption for you.