My housemate and I want to stop renting and buy a property together. Is this wise?
Property Clinic: We have considered getting a joint mortgage for three to five years
‘When you purchase a home, you enter into a legally binding agreement where both you and your housemate will be jointly and severally liable for all costs, so be prepared.’ Photograph: iStock
My housemate and I (both 30) are keen to get on the property ladder and, while saving, are aware of the drag that rent is currently having and we are facing all the usual issues with trying to buy a place in Dublin in 2021.
One option we had thought about, but not fully explored, is getting a joint mortgage for three to five years. With our combined incomes we could get something better than a basic one- or two-bedroom apartment in Dublin. Our thinking is that after three to five years in selling that joint property, as we seek to get our own longer-term places, it would be more beneficial than if we just had a basic apartment to sell.
An alternative is also to not buy anything and save individually for a further three to five years with our €800 per month rent. I would really like to hear your expert advice on this.
I understand your issues with trying to buy on your own, especially when the average price of a house in Dublin currently costs €399,707. At that level you would need to have a deposit of €40,000 and be earning an annual salary of €103,000 which makes it increasingly difficult for younger first-time buyers to get on the property ladder as an individual.
Supply has also decreased even further, with just 2,450 properties for sale in Dublin city and county in February 2021, compared with 3,700 in June 2020. Covid-19 restrictions closing down construction sites has substantially reduced the supply of properties available in Dublin in an already tightened market.
By exploring to purchase a home jointly, you will definitely have more options. When you purchase a home, you enter into a legally binding agreement where both you and your housemate will be jointly and severally liable for all costs, so be prepared.
From a financial point of view, it makes sense to invest your money in an asset
If you choose to purchase jointly, it is imperative that you draw up a separate legal agreement outlining all the “what ifs”, including detailed solutions to mitigate any future disagreements. What if one party wants to sell in two years, what if one party dies, what if one party emigrates due to work, what if you both want to acquire the property independently in five years?
It’s reasonable to assume that you or your housemates’ priorities may change in the short term, so having a firm plan, agreed in advance, is essential to alleviate any potential future disagreements that could strain on the friendship.
You will also need to consider how you structure the ownership of the property and I suggest obtaining separate legal advice on this. Most couples buy properties as joint tenants but as friends buying, typically it’s as tenants in common. This means that you both have a right to possession of the entire property. But if one of you dies, the deceased member’s share of the property goes to a beneficiary of the deceased’s estate as a portion of the estate rather than passing to the other existing owner, which would be typical if the house is owned under a joint tenancy.
From a financial point of view, it makes sense to invest your money in an asset. While all indications for 2021 are for a resilient performance in the Dublin residential market as demand continues to outweigh supply, there is no guarantee. However, if you continue to rent, your monthly outlay isn’t really working for your benefit.
At least by purchasing a home you are not only investing in your future, but you will have security of tenure and hopefully you will see the return of your initial capital investment plus any potential gains the residential property market can provide during your ownership period.
Buying a home with a friend has a lot of benefits but be aware the property market is cyclical and prices may fall as well as rise. The very best of luck with your decision. – Anne Carroll
Anne Carroll is a chartered valuation surveyor and a member of the Society of Chartered Surveyors Ireland scsi.ie