Renting a house in the city can go a long way. But most people don’t have the money to buy that beautiful townhouse alone. It happens more and more often that two friends decide to put the incomes together and buy a house together. Sounds very practical, but is buying a house with friends that too? With the finer Closing Costs in Long Beach CA this is important now.
Buying a house with friends, how does it work?
Together you can borrow more from the bank for your mortgage than on your own. In theory, this gives you the option to live in the city or, simply, to buy a larger house. In practice, there are some things to keep in mind when you think about buying a house with friends.
One person buys the house
Ideal! One of you has enough income to take out a mortgage. The other person pays a monthly rent to the person who bought the house. In this way the ‘tenant’ helps with paying off the mortgage while you both enjoy the house. Yet this is a somewhat too rosy picture, because the bank must also agree that the house is subleased. And it is not often that you get permission from the bank. In that case you may not officially rent the house.
Buy the house together
Another option is to take out a mortgage together. Then both incomes will count and the house will be in the name of both of you. When the bank determines how much you can borrow for your mortgage, they look at what you earn. When buying a house with two people, multiple incomes are therefore considered. The highest income counts for 100% and the second income for 70%. This is how it works: Peter earns 35,000 euros a year and Jan earns 40,000 euros. The mortgage is then based on an income of 64,500 euros.
We will honestly share everything
You live together in the house and are both responsible for paying the monthly costs for the bank. If this does not happen, you are therefore both liable for it. If your roommate is unable to pay his share, the bank can also turn to you for this.
What if one of you suddenly wants to move?
You have no relationship, so a cohabitation contract is not possible. But it is possible to make mutual agreements about what you do in the event that something happens. It could be that one of you decides to move because, for example, he or she is going to live together. In the worst case, one of you will die . It may be strange to think about this, but it is necessary if you want to buy a house together. It is smart to make agreements when taking out the mortgage and to record these in black and white. Think of agreements about who pays what or what happens if you get into a fight and can’t live together anymore. To prevent hassle, you can have it recorded that you both live together for five years, then this cannot be canceled before that time. You can then renew that promise again for a maximum of five years each time. Remember that you are stuck with this and it can be frustrating if one of you wants to leave if you get into a fight, for example.