You already know it's going to be fun. Here's how to buy a house with a friend the smart way.
Who says you have to have a romantic partner to buy a house with someone? If you find yourself single and ready to buy a place, joining forces with your best friend might feel like a no-brainer. After all, buying a home together can benefit your finances when it comes to your mortgage rate or saving for a down payment. On the other hand, it is a little different than buying a house with someone to whom you’re legally bound.
Rent together first.
Being able to live together in harmony is a big factor in the success of buying a home with your best friend. Renting together can provide the perfect dry run before you’re locked into a mortgage together. No matter how well you know each other, you’ll know each other differently once you live together. Is one of you neater? Does one of you come up short when it’s time to pay the bills? The only way to know if you and your housemate will sink or swim is to dive in.
Be Open About Your Finances
There are no financial secrets in homeownership. If you co-own a home, you co-own the mortgage. Both of your finances will be considered when applying for a mortgage, so if you’re hiding a terrible credit score, for example, it won’t stay hidden for long. Before approaching a lender, share everything about each other’s finances, including your monthly income and how you spend it. In order to protect yourself, it’s important to know for sure that your best friend can afford to make their half of the house payment each month.
Discuss Shared Responsibilities
A home comes with a whole host of tasks and liabilities that you will be on the hook for together. Not only will you need to discuss how a plumbing bill will be handled for the toilet only one of you uses, but you’ll also need to determine who will clean the gutters. After all, if you end up with water damage or foundation issues because of clogged gutters, both of you will take the financial hit.
Once you are on the same page about your finances and responsibilities, it’s time to consult with a lawyer. That can feel awkward, but think about it: Being married is a legal contract, too. You want to make sure you and your best friend are protected in the same way any married couple is when they buy a home together. In your legal agreement, include your plans to divide up finances and responsibilities, how you’ll share any tax benefits or profits from a sale, and how you’ll accommodate changes, including if one of you loses your job — or gets a job offer across the country and wants to move out.
Discuss Your Long-Term Plans
Perhaps your goal is to live with your best friend until the end of time. But more likely, if you’re young, you’ll eventually move on to the next phase in life, either on your own or with a partner. Or, a romantic partner might come along and want to become a third owner of your home. No matter what, if you’re not saying “till death do us part” with your home’s co-owner, you need a mutual understanding of each other’s long-term goals. If you plan to own a home together for five years and then sell, you’ll need to commit to those five years, no matter what else happens in life — and expect your best friend to do the same.
Ready to buy a home with your best friend? Shopping for a home together will be the same as it is for everyone else — exciting. Sit down together and discuss your wants and must-haves, and start house hunting. Who better to go on a homeownership adventure with than your best friend?