What are the cons of buying a house with your mates?
Even with house prices starting to contract in some parts of the country, scraping together a deposit remains a key challenge for many first home buyers. Consequently, more and more people are entertaining the idea of splitting the costs, sharing the resources and purchasing property as a collective.
Sounds like a good solution, right? Well, yes and no. Here are a few downsides to buying a house with your mates?
1. You’re liable for all of it
The financial outlay might be shared, but the liability is not. That is, if one of your friends happens to default on repayments, you could be held 100 percent accountable – regardless of who is technically at fault.
“…even if you are sharing the mortgage, you are still liable for all of it,” explained Andrew King of the New Zealand Property Investors Federation, as quoted by the NZ Herald.
You may be able to limit your liability to a certain extent by specifying details in a joint ownership agreement (which we high recommend doing!).
2. It can complicate the home loan approval process
While using NZ home loan comparison tools can help you streamline the mortgage application process, it’s important to keep in mind that buying a home with your mates introduces more uncertainty than purchasing solo.
As a result, some mortgage providers may be more hesitant to approve your home loan, while others don’t allow these types of mortgages at all.
3. You might lose your mates
It’s a sad fact of life that money and mates rarely mix well. Yes, the aforementioned joint ownership can be used to define what happens in certain scenarios, but the fact of the matter is financial disputes can and do arise when dealing with large amounts of money – regardless of how close you are with your mates.
Want to talk to a professional about whether this might be a good idea for you? Get in touch with our friendly advisers who will be able to help you out!