Given the soaring prices of real estate, more and more people are opting to buy property jointly, thus dividing the mortgage repayments equally. Joint ownership is usually undertaken with family, friends, or a partner, as it requires a high level of trust in order to pool financial resources and enter into an agreement of this sort.
When buying with family, friends, or a partner, it is essential to remember that while emotional attachment is a part of the equation, it should not come in the way of legalities. Make sure you consult lawyers when arranging for joint ownership, and have a co-ownership contract drafted up. The contract should clarify the financial obligations of all partners, and lay down the rules for what will need to be done in a worst-case scenario, e.g. if one owner suffers a financial set-back, or if the relationship between partners turns acrimonious and leads to a separation. Treat the entire thing as a business relationship, and make sure the contract protects the interests of all the parties involved.
When having a contract of this sort drafted, it is essential to understand that there are two types of joint ownership. One type is known as ‘beneficial joint tenants’, and in this, there are no pre-defined shares as far as the property is concerned – if one partner passes away, the entire house will automatically pass onto the other partner, whether the deceased was in agreement with this or not. The second type is known as ‘tenants in common’, and in this every partner owns a pre-defined share – if the property is sold, the profits are split equally, and if one partner dies, their share can be left to someone of their choice in their will. Choose the type that suits your preferences and circumstances best – however, keep in mind that all partners are equally liable to pay off the debt to the bank, and if one person defaults on the payments, the other needs to take up full responsibility.
In addition to having a contract drawn up, it is also important to look into the types of mortgages that are available for parties who are interested in joint ownership. Many lenders offer mortgages specifically designed for this, so you should look around in order to find the best deal available.
Along with contracts and mortgages, there are several small issues that should be taken care of if you wish to make the entire experience of buying and owning a home with family, friends, or a partner a peaceful and enjoyable one. Make sure all the paperwork is kept in order – preserve all important documents so they can be accessed when needed. In addition, you should also consider a joint bank account – this way, all financial matters will be transparent and everyone will be equally involved, as opposed to dumping all the responsibility on one person. Finally, you should also maintain an inventory of items that are not shared, so you all know who owns what – this will go a long way in preventing any disputes.