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Depending on your mortgage requirements you may find the lender effectively ignores the one or two lowest incomes, so in effect as a group you can't borrow more. This happened to some friends recently.
I would 100% recommend drawing up a contract to cover what the exit plan is and as many eventualities as possible.
One of the key advantages to doing this is you all discuss, understand and agree what outcome you are happy with collectively. And more to the point it's agreed now while you like each other.
Things to think about:
- minimum collective holding time (probably with a default position to sell at that point unless extended)
- maximum collective holding time (be realistic - use the difference between this and the minimum to set sales hurdles)
- equity splits in the property based on deposit and mortgage payments.
- valuation method.
- decision making (could be there be a deadlock? How will this be broken? Is there a deciding vote? - you could always use something totally impartial like a random number generator and a rule).
- event of a default.
- minimum collective holding time (probably with a default position to sell at that point unless extended)
hugo7-
Yeah, they'll only use 2 incomes with the mortgages we're applying for. But we're not borrowing to the highest levels we can and, between the four of us, the repayments are so low that we'll be able to save a lot towards the next place.
Agreed on all the bullet points. We need to sit down with a solicitor.
All the info is with the mortgage broker. Looks like we're going ahead. There's a double garage and, as three of us are musicians, it's going to get converted into a studio (rehearsal rather than recording) and bike workshop. I may have to start a current project thread. Getting ahead of myself now. Squeaky bums all round.
Thoma
We've put in a load of offers around asking price but keep getting outbid.
Yesterday some old friends who are looking in the same area got in touch having had an offer accepted. They had a third person who was going to go in on the house but has pulled out. They've asked if we want to take her place.
The house is awesome. Much nicer than we could afford on our own but what are the pitfalls of being tenants in common? If we want to get our own place in a few years and we want to re-mortgage and buy as the four of us, using the equity of the first house, is this possible?
Will this leave us in a weak position if we leave with only the value of half a house?