Homebuying can be filled with emotional and financial drama. So you may think mixing those stresses with a friendship is foolish. But more people are meeting the challenge of rising house prices by joining forces with friends. That may be a good sign if you’re debating whether this is the answer to your house-buying problem.
The Upsides Are Real
Despite the warnings you will hear from many experts, buying a house with a friend might attract you for several reasons. Firstly, buying together can get you and your friend a house faster than on your own. Plus, sharing the home-buying process with someone you trust can reduce your anxiety. As a first-time home buyer, such an investment can feel less intimidating if someone else shares it. Finally, approaching the home ownership adventure with a friend can make your friendship even stronger, assuming you have similar goals and values.
The Downsides Are Many
On the other hand, some disadvantages and pitfalls can derail your finances and friendship! For one thing, your mortgage application is only as strong as the weakest link — the one with the least favorable credit history.
It’s frustrating for the person with better credit to have their options limited by the person with worse credit. This points to how financial entanglement can complicate your relationship. In addition, anything one of you wants to do with the house will be a negotiation instead of a personal decision. Assuming you both live in the house, the same roommate disagreements you’ve encountered while renting will inevitably arise. To avoid these risks becoming nightmares, you need to carefully plan a legal agreement, which brings up another potential disadvantage – time and money spent on a lawyer!
Your Unique Situation Matters
Ultimately, you have to consider your specific circumstances when deciding whether home-buying with a friend is a good idea. Every home-buying decision depends on the combination of your personalities, finances, and individual dreams.
There is no one right “recipe.” The best you can do is try to be realistic about how well you know each other and how well your financial and personal styles mesh. If you’ve already been happily living together, that may be a good sign. But don’t forget about any unforeseen changes to either of your lives or plans.
Here are some questions you should ask yourself and your friend before taking the risk and buying a house with your friend. After all, you have to make sure you’re both being realistic.
- Why do you want to own a house? Do you see it mainly as an investment? Or is it more of a home?
- Where do you see yourself in five years? This old-school job interview question can really clarify things when you’re looking to buy an asset that’s not easy to get rid of quickly.
- What is your money style? Don’t kid yourself that you will simply “balance each other out” if one of you is a hard-headed saver and the other is a big spender.
- What are your financial goals? If it seems like the two of you are on totally different financial journeys, you will probably have to take separate roads to get there.
- What are your plans around marriage and family? If you dream of a family, you probably dream of a family home. If either of you hopes that will happen within the next few years, buying a property with a friend is probably not the best choice.
Although many people can’t imagine mixing up their friendships with their finances so profoundly, buying a house with a friend can work for some people. The key is honesty, realism, financial stability, and personal harmony.
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