If you plan on living with a close friend, you may be considering buying a home together. After all, with two of you on the mortgage, you can afford to buy a more expensive place and may even get a better rate. But the truth is, buying a house with a friend does not always work out well in the long run. You should put some careful thought into this decision before you sign on the dotted line. Here are three specific factors to consider.
1. What will happen if one of you needs to move?
When you own a home on your own or with a spouse, the decision to move is all your own. If you have a job offer across the state, for example, you can sell the home and move. When you co-own a home with a friend, the decision to move is a more complicated one. What if you need to move and want to sell the home -- but they don't want to?
2. What if one of you struggles to pay?
Having both of your names on a mortgage may become a burden on your friendship if one of you becomes flaky about paying or starts struggling financially. If your friend does not pay their half of the mortgage payment, you're responsible for it. If they pay late, it will affect your credit score. Before you buy a home with a friend, it's important to be very confident in their ability to handle their finances.
3. What if you stop getting along?
Many friends move in together and find that, although they are good friends, they don't get along when they're cohabitating. This situation is easy to address when you're renting; one of you just moves out. When you own a house together, however, you can't just move out at the drop of a hat. You might end up sabotaging your friendship or living with someone you no longer get along with just because you share a mortgage. So before you buy a house together, it's important that you've lived together before and verified that you can continue to get along in a cohabitation situation.
If you decide that co-purchasing a home is not for you, then keep in mind this alternative: one of you could purchase the home, and the other could live there as a tenant and roommate. This way, you get to live together and the mortgage holder gets help with the mortgage payment, but if there are any conflicts, it's clear who will be moving out. Contact a real estate agent for more information about purchasing a home.