If you’re considering buying a house with a friend to save money, you’re not alone. Rocket Mortgage surveyed potential home buyers and found that nearly 60% of renters were open to buying a home with friends.
By sharing expenses and pooling financial resources, co-buyers can get into the housing market faster and reduce many of the costs associated with homeownership. If you’re having trouble entering the market, this is why co-purchasing may be the solution you’re looking for
How Does Shared Ownership Reduce Financial Barriers to Home Ownership?
If the biggest obstacle to homeownership is affordability, you have more purchasing power when you combine your income with someone else’s income. Saving tens of thousands of dollars for a down payment can be difficult on your own. Combining your income with someone else also allows you to split the down payment and potentially get a home faster.
Owning a home comes with a variety of financial responsibilities, including mortgage payments, property taxes, repairs, maintenance and insurance premiums. When you buy your home with a friend or family member, everyone can contribute to the monthly property expenses and household bills. This greatly reduces the per capita cost of home ownership.
Hidden Costs Are Easier to Manage
Many first-time home buyers underestimate the cost of ongoing and surprise expenses that come with owning a home. Depending on your location, Property taxes can cost thousands of dollars dollars every year. In some areas, property taxes increase significantly each year. Sharing expenses makes it easier to handle big jumps in property taxes and other bills that seem to be getting bigger.
Rising insurance premiums are another hidden cost of homeownership, along with maintenance and repairs. When the cost of materials increases, so does the cost of small jobs like repairing a porch or replacing some shingles on your roof. On your own, unexpected repairs to fix plumbing or electrical problems can be devastating, but when shared with someone else, they become manageable.
Joint Purchasing Can Improve Your Housing Options
While the main benefit of buying a home together is saving money, it can also improve the quality of housing you can afford. When you combine your income with someone else’s income, you are more likely to have access to a home in an area with good schools and better amenities. You won’t have to settle for a tiny house. Instead, a shared budget can give you access to homes with garages, large yards, home offices, and updated features.
You Will Create Capital Instead of Paying Rent
If you’re tired of spending money on rent, shared ownership is a great way to become a homeowner. Every mortgage payment you make will contribute to the equity in your home rather than financing your homeowner’s equity. Over time, as the value of your home increases, the equity you have may also increase.
Living Together Has Practical Advantages
Living alone has some advantages, but when you live with other people, you can share cleaning and other household chores and have more time for yourself. Living with a good friend can make you feel more connected and less lonely, even if you don’t hang out together all the time.
Friends living together can help each other when necessary without having to find strangers. For example, some friends make arrangements to help each other with child care, picking up each other’s children from school, accepting deliveries, caring for pets, and other tasks.
Common Mistakes to Avoid
Buying a home with a friend or family member has many advantages, but there are also several challenges that can lead to costly mistakes. For example, don’t assume that everyone who wants to share a home has the same goals. Some people don’t even realize they have future plans that would conflict with buying a home right now.
It’s crucial to get an agreement in place before trying to get approved for a mortgage. First, everyone needs to agree on issues such as exit strategies, joint ownership percentages, financial contributions and dispute resolution processes. Having everything in writing provides a definitive source for disagreements and reduces the likelihood of disagreement.
Joint Purchasing Is a New Path to Home Ownership
For buyers struggling with affordability, buying a home with a friend is a practical alternative to waiting and hoping housing costs will drop. While successful co-purchasing arrangements require planning and strong communication, sometimes it’s the best way for people to become homeowners.
Photo: Tierra Mallorca: Unsplash
