Buying a home is one of the most important steps in anyone’s life. If we do not want to take this step alone, but with our friends help, things can get even more complicated. And if we have to apply for a mortgage on top that… Well, you might need a lawyer!
In this article we will be talking about mortgages with two, three or even four holders, as many as friends decide to buy a house collectively. This can be an interesting option if what we want is to acquire a second home: a house on the beach, in the mountains or anywhere else. But how can we best go about this? What are the advantages and disadvantages? And most importantly: is it really worth doing?
Buying a home with friends is perfectly possible
That’s for starters, some may decide to make this move as an investment choice and others may consider it as a way to acquire a second home, making the operation more affordable, because it is shared. And therefore, the expenses are shared as well. Buying a property with a person you are not related to is perfectly possible. It is a pro-individual, a formula in which it is essential to leave the percentage of participation of each person in clear definition. It does not matter if it is 50/50 or if the percentages aren’t equal.
To take this step, it will also be necessary to create what is called a community of goods. This is a company without a legal personality (see Articles 392 to 406 of the Civil Code). This is a necessity for individuals who buy the property to also take responsibility for their share of the mortgage payment, in addition to the expenses of the community of owners, municipal taxes, future reforms, taxation, etc.
At the time of the exchange, it is also required to draw up a contract setting out the conditions of the community of goods This must include the contributions to be made and the responsibilities of each member. The reason for the creation of the community of goods must also be specified. Whether it is to use the property as a second home, to rent (as an investment), as a first home, etc.
Is it advisable to buy a house with friends
This may seem like a risky choice at first, but studies find that young people are deciding to become homeowners with other friends, an initiative that experts describe as financially wise. Dividing a mortgage among several people (payers) has advantages. You pay less and, in return, you own a house. Either to live in regularly or to use as a second home. Something that, for many people, is impossible to take on alone.
But this operation also has disadvantages that should be taken into account before taking the final step of signing a mortgage with friends. The first one: that there are few banks that offer mortgages for different holders, which can end up giving us problems when it comes to getting the capital to make the purchase. But there is another question to take into account:
What happens if one of the members wants to sell and leave the co-ownership?
If this happens, there are two options for the other mortgage holders – either buyout the share or, if they cannot afford it, part with the property. And in case of non-payment? The debtor could end up claiming from any of the co-owners and, therefore, one or more of them would have to assume the debt jointly.
Forming a community of goods and purchasing with you friends or colleagues can be a great option however the real risk is whether all members of the community of goods will choose to pay off the mortgage in full, otherwise you end up parting with your asset.
Should you require any assistance or legal counsel concerning properties, purchases and sales on the islands of Mallorca, Menorca and Ibiza, please contact us at your convenience at info@mallorcasolicitors.co.uk or by phone on the numbers listed on our contact page.
