Strange bedfellows
Guardian Unlimited Money
Published on Friday November 3, 2006
Business | Features | Money | Technology
As rising prices force many people to abandon their dream of home ownership, co-buying is beginning to find favour among the hopefuls. Chris Alden investigates.
Would you buy a house with someone you’d met online? If not, you’re probably in the majority – but if so, you could be in luck. As house prices continue their upward spiral, pricing would-be first-time buyers out of the market, a number of websites have sprung up offering to introduce people who want to co-buy a home.
It’s a bit like online dating, but instead of looking for love online, you’re looking for someone with the extra financial clout you need to get both of you on the property ladder. At websites such as Sharedspaces.co.uk or Co-buyWithMe.co.uk, first-time buyers can post their details (including what kind of property they want, how much of a deposit they can muster and where they’re thinking of buying) and meet like-minded people with a view to buying a house.
Just like renting a flat or house with a stranger you found through a small ad, searching for a co-buyer this way can be risky. But the sites insist they could help a would-be buyer get on the property ladder more quickly than would otherwise be possible.
The property doesn’t have to be bought equally – it is possible to co-buy with someone who has a different amount to put up as a deposit or to split the monthly mortgage payments in any way you choose. However, it is more straightforward if you are both able to make the same financial commitment.
Picking potential partners
If you’re considering buying with someone you meet online, says Helen Adams, who runs FirstRungNow, an information website for first-time buyers, you need to find out as much about them as possible.
“There’s a risk in that you don’t know who you’re getting into partnership with and you don’t really know their history,” says Adams. She suggests potential co-buyers share their credit ratings and police records and get to know each other’s family and friends before they commit to anything.
Ray Boulger, from mortgage broker John Charcol, goes further, saying potential co-buyers should rent for six months before they start looking for somewhere to buy. “That’s a good way of establishing whether they’re comfortable living together, whether they’re going to have arguments about the bathroom in the morning or who’s messy in the kitchen,” he says.
But the most important step of all, says Sharedspaces’ founder, Richard Cohn, is getting a legal structure in place. However you co-buy, he says, whether it’s with a spouse, family or friends, or through his website, you need a solicitor to draw up a “deed of trust” detailing the relationship between the two parties.
“What happens if person B wants to get married or gets a pay rise and can afford to buy a property of their own?” he asks. “It makes you think of the whole life cycle of the relationship.”
Co-buyWithMe’s founder, Theo Michaels, bought a property with mutual friends before setting up his website. In addition to a deed of trust, he and his co-owners drew up a less formal “cohabitation agreement” setting out what he calls the rules of the house. He recommends each co-buyer has their own solicitor in order to ensure they are getting independent legal advice.
Selecting a mortgage
Because co-buying with a friend is more likely to be a short-term arrangement than buying with a partner, Boulger says it’s important to pick a mortgage appropriate to the circumstances.
“Because it will be more difficult than normal to know when they are going to need to sell, they need to be careful that the mortgage deal they take out is not going to lock them into nasty penalties,” he explains.
“I would recommend either they go for a mortgage with no early repayment charges, or they take a deal with no early repayment charges beyond, say, two years, though even that could be dangerous, because circumstances do change.”
Looking for a mortgage without any repayment charges will limit your options. Boulger says there are only a few fixed rate mortgages with no early repayment charges, and the best discount deals tend to come with tie-in periods. However, it might be worth paying more each month for the flexibility a penalty-free mortgage offers.
It’s still early days for the property co-buying websites, and examples of people who have bought a house after meeting online are hard to come by. But the idea appears to be gathering momentum.
Cohn, whose website launched in February, says just over 2,500 people are registered on Sharedspaces, while Michaels, who launched Co-buyWithMe in May, says around 700 are registered.
As well as first-time buyers, the co-buying websites are hoping to attract those looking to buy a second home. Michaels says that if you want to invest in property, co-buying with a number of people, in preference to putting your money in one property, might allow you to spread the risk. And he also sees the potential in the overseas market, saying people could co-buy a holiday home rather than entering into a timeshare.
But ultimately, says Adams, rising house prices are the real catalyst for co-buying. “I don’t want to call this a desperate measure,” she says. “But people are quite adventurous these days, and perhaps they are recognising they are going to have to take a bit of a risk. Perhaps this is the way we’re going to have to go.”
Case study
Harry Smith, 29, is a painter and decorator living in Shoreditch, east London. He couldn’t afford to buy a house on his own so he posted his details on Co-BuyWithMe. He says he would never try online dating – people on sites like that “need to get out more” – but says he has no such issues with co-buying.
“A lot of my friends aren’t into buying at the moment so it was quite a convenient way of finding someone in the same situation,” he says.
Last month he met 22-year-old Natalia Patel, a fashion graduate working as a sales assistant and in a nursery, who is looking for a job as a primary school teacher. She wants to get on the property ladder as soon as she can.
“We swapped numbers, had a couple of conversations on the phone, met up for a couple of beers, and worked out that we could actually do that together,” says Smith. “We’ve sat down, gone out a couple of times, met up at the weekend and wandered round a few estate agents.”
“The fact he’s a painter and decorator is really handy,” adds Patel.
Smith sees the financial advantages of co-buying. “There’s no point in us both renting somewhere when we can pay the same amount as the rent and actually go in on a house,” he says.
But he is not about to rush into things. “You need to build a friendship with someone first,” he says. “We’ve got to make sure it’s the right thing to do.”
See this article on the Guardian Unlimited Money website
View Chris Alden's journalism portfolio
Commenting is closed for this article.
All content © Chris Alden. Original design by Andy Brockie, adapted by Chris Alden over the years.