The two types of joint home ownership

Stepping onto the property ladder is a major life goal for many people; however, the current economic landscape is making it more and more difficult for people to escape the rental market, particularly as a sole purchaser.

This is why many opt to purchase a property with another person, whether a partner, a family member, or a friend. Not only does this provide the opportunity to combine your savings and put down a larger deposit but also it will enable you to obtain a larger mortgage and ensure you have someone to split the bills with each month.

It is common for two people to purchase a property together, but did you know that it is possible to share a property with up to three other legal co-owners? If you have trusted family members or friends who are ready to make such an important investment with you, exploring your joint ownership options could be a wise move.

What is a joint tenancy?

When purchasing a property with at least one other person, you have two options. The first option is to purchase as joint tenants, which requires all parties to act in unison as a single owner. You would need to obtain a joint mortgage from your lender and select your legal representation together, ensuring you work with a qualified and experienced team such as Sam Conveyancing.

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All co-owners must agree to sell the property before it can be put on the market and if one co-owner dies, the property will automatically be passed on to the other co-owner(s) in a process called right of survivorship. This means joint tenants are not able to leave the property to another party in their will.

What does tenants in common mean?

The second option is to buy as tenants in common. Tenants in common each retain ownership of a share in the property, with the shares not needing to be equal in size. As an example, you could retain a 60 per cent share in a property and your child could own a 40 per cent share.

This type of property ownership is most commonly used by a group of relatives or friends. While all parties must agree before the property can be sold, it is possible for tenants in common to include their share of the property in their will.

It is possible for each co-owner to obtain a separate mortgage to cover their share; however, most lenders will not be open to this and will instead require a joint mortgage.

Is there a way to protect my financial contributions as a co-owner?

It is generally advisable to obtain a deed or a declaration of trust, which is a legal document that sets out each co-owner’s financial contribution to the purchase of a property.

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It is important to factor in the deed of trust cost alongside other expenses that will arise during the property purchasing process, such as the HM Land Registry fee and stamp duty.

With a declaration of trust, you can set out precisely what you want to happen to your financial contribution if you want to sell the property, if one or more parties are unable to pay their portion of the mortgage, or if there is a breakdown in the relationship.

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