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Avoiding the potential pitfalls of co-buying

Avoiding the potential pitfalls of co-buying

Thinking about co-buying a home but have some niggling doubts? We can probably guess a few of them. We’ve probably also thought about a few potential problems that you haven’t…but don’t worry we’ve also developed practical solutions to help you avoid the potential pitfalls of co-buying a home:

Keeping your freedom when co-buying a home

Think about when people usually buy a house together; traditionally it was when a couple got married but this has progressed to when people are ready to make a long-term commitment to each other. Buying a house in these circumstances works because as part of a couple you’ve usually determined at least the short-term life path you plan to travel together. You know where you’re going as a couple, or at least you think you do…

When you decide to co-buy a house with a friend you don’t have that planned joint path. So why is this a problem? The simple answer is that it isn’t, until one of you wants to move on and you’ve not discussed what happens to your home in this situation. Losing the freedom to travel your own path is potential pitfall number one and without proper planning this can be a stressful situation to deal with. Let’s look at the two ways the conversation could go after you’ve announced that you’re leaving:

No planning:

You’re moving to Portland? You’re still going to pay your share of the mortgage, right?

Buying with Home Savvy:

You’re moving to Portland? That’s awesome, I know this great place we can grab a beer when I visit.

OK, it might not go quite like that but you get the gist. Planning how you’ll handle situations like this as part of the co-buying process is the best way to give people the freedom to follow their own paths without it impacting the other co-buyers. Home Savvy helps you get clear agreements in place so that you’ll know the possible solutions to these life changes before they happen and in turn avoid any potential disagreements. Our co-buying system allows each share of the house to be sold independently of the others with all of the home owners consent so if you or a co-buyer need to sell your share you will be able to do so without affecting your roommates mortgages.

Avoiding a financial fall out between friends

Have you ever completed a financial transaction with a friend? How’d it go? Most of the time our friendships are strong enough to handle minor disagreements over money, like who bought the last round. Things can get a little more stressed when you start talking about larger sums of money. Welcome to pitfall number two: friendships ruined by finances. Buying a house with a friend is a big deal, in fact buying a house at all is a big deal, but it’s also an awesome opportunity. The financial gains alone are a reason to make the move but in addition you also gain the freedom of being your own landlord. Want to paint your room avocado green? Go ahead. Want to become the cat lady of the Sunset? Here’s the number for the SFSPCA shelter. Want to build equity every month instead of paying rent? You got it. So how do you handle finances with friends without fighting over money? It’s actually pretty simple:

Plan ahead and plan some more

The financial pitfalls of owning a home with a friend can happen over even the smallest day-to day expenses. Preventing this issue is really pretty simple. Plan how all home related expenses will be split and who will handle paying the bills. Avoiding miscommunication and misunderstanding goes a long way to preventing arguments over living expenses. Home Savvy offers a range of advice for co-buyers to help make your co-buying experience fun and rewarding. After all no one really wants to be the nagging roommate or be nagged by a roommate so getting these details together early in the process let’s everyone enjoy their new home.

Protecting your finances when co-buying

This is probably the most important of the three pitfalls mentioned in this post. Protecting your finances can prevent you from dealing with credit issues for many years to come. Pitfall number 3: your co-buyer gets into financial difficulty and their problems affect your credit. This pitfall is the most complex problem to solve as the implications of one co-buyer getting into financial difficulty can spread to the rest of the household if they fail to pay their mortgage. With a standard co-buying agreement the extent of the fallout could result in mortgage defaults and credit issues for all co-buyers. This isn’t a small issue; this is something that could impact the lives of all of the owners for many years. So how do you protect yourself from potential financial issues of your co-buyers?

Use Home Savvy

One of the long-term benefits of using Home Savvy is that our co-buying system protects the rights and finances of each co-buyer. Your credit score will not be impacted should one of your co-buyers miss a mortgage payment. We’ll also step in to find a practical way to help you fix the problem. This helps take the stress off of the friendship and means that instead of you worrying about your own finances you can be there to support your friend and co-buyer through a difficult time. Home Savvy leaves you free to be a friend instead of a financial partner and protects your finances. We’re here for as long as you need us.

If you still have any doubts or concerns about co-buying a property drop us an email today. One of our team will be happy to talk through your concerns and find the solutions to make you comfortable with buying your first home with friends!

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