Whether you’re moving in with someone you love or sharing the financial burden of buying a property with a friend, there’s a lot to think about. These days, with property prices already sky high and going up fast in many areas of the UK, more and more of us are considering partnering with others to buy property. This plain language guide tells you everything you need to know about partners and property investment.
Why Invest in Property?
There are so many reasons why so many people are investing in property in the UK. Some get involved simply for the financial returns which, in a fast-growing market bedevilled by housing shortages, are almost always reliable and often generous. The long term returns tend to be excellent, and the economic theory of supply and demand means that unless the nation builds many millions of new homes very quickly, prices are likely to keep rocketing. London, being the capital, will probably remain the UK’s most expensive place to live. Some say all UK property prices are due to go up more than 20% by 2025, and that alone makes joint property investment a popular move.
Then, of course, there are plenty of people who simply want to move into their own home but can’t afford to buy on their own. Add years of low interest rates and the appeal of property joint ownership becomes even clearer. It can be easier to get a loan, and secure a larger loan than you can as an individual. And two heads are often better than one where big decisions are concerned.
Property Joint Ventures
What is a joint venture? A property joint venture agreement simply involves two or more people collaborating to buy a property. A property joint venture comes with advantages and disadvantages. There’s no law around who can be a co-owner of a property. Anyone can jointly own a place, including your spouse, parents, children, and siblings. We’ve already looked at the advantages, so what about the disadvantages?
The stresses behind buying a property could mean you start the process as friends and end up quite the opposite! Maybe one of you might want to sell up, or sell their share, and you don’t. You should decide beforehand how much of the property each of you owns as a percentage, depending on your initial investment, and think through what you’ll do if someone decides they want out. And it’s vital to keep everything clean and legal, safely in writing rather than depending on informal agreements. A buyout clause, for example, will protect your interests much better than a verbal agreement.
Options for Joint Property Ownership
What does joint ownership mean? It could involve either joint tenancy or tenancy in common. First, what does joint tenancy mean? A joint tenancy means each person involved enjoys the ownership of the complete property. If one of the owners dies, the property passes automatically to the remaining joint tenant or tenants. This is called the ‘right of survivorship’. A maximum of four people can share a property as joint tenants. If you want to end the joint tenancy you can do so via a written agreement any time you like. If you can’t agree to the terms with your fellow owners, you might need a court order.
What does tenancy in common mean? All the owners enjoy equal rights to the whole property, but each of them only owns a specific proportion. If, for example, you paid a bigger deposit you might own a 70% interest in it, with your partner owning 30%. If one of you dies their proportionate interest doesn’t automatically go to the other joint owner or owners. Instead, it gets passed according to their Will. If there’s no Will it’ll fall under the UK’s intestacy laws. If you’ll be contributing differing amounts you’ll need a trust deed drawn up by a solicitor, which formalises the shares you hold in the property and helps prevent ownership disputes.
All this means if you want to leave the place to your children after your death, a joint tenancy agreement isn’t much good but a tenancy in common is perfect. You know for sure that your property will be passed on to the person or people you want.
It’s likely you’ll need a joint mortgage. So how do joint mortgages work? Mortgages for property co-ownership involve a mortgage in the names of both or all of you, and everyone named on the mortgage paperwork is responsible for the repayments. You’re allowed to decide how you share the equity between you, the percentage of it that you own. Most of the time joint mortgages are taken out by couples but not always – friends and family can do it, too. You can even buy with a business partner.
Cohabiting unmarried couples, cohabiting couples who want to buy before getting married, and those with no intention of marriage are all eligible. Most of the time people choose to become joint tenants with equal ownership, so if one dies the joint tenant will automatically inherit.
How many people can jointly own a property? While most are taken out by two people, some lenders let as many as four people buy together. And buying with someone else means you can often borrow a lot more thanks to your combined deposit and combined income.
Are you interested in property co-ownership?
Investing in property with a second person, or between as many as four of you, can open your choices right up, with a bigger budget and a larger mortgage. Whether it’s a buy to let property or somewhere for you all to live, joint ownership can make all the difference between being able to afford somewhere special and being stuck renting for years to come. Are you ready to make the move with someone you trust?