What is co-buying?

'Co-buying', or 'joint ownership', means clubbing together with family members, friends, or these days even someone you've met online to share the deposit, mortgage payments and bills on a home. When you come to sell the property and move on, so long as prices have risen you'll get a share of the gains in proportion to what you've put into the kitty.

Out of reach

The property boom of the past two decades has meant that house prices remain high. And, thanks to the credit crunch, lenders now insist on a larger chunk of deposit - at least 10%.

According to Moneyextra.com, if you're on an average £22,900 salary, buying a property is almost impossible. This is a fairly recent phenomenon - at the end of the 1980s, about 40% of young people aged 18-24 had bought their own place. Now, less than 20% manage it.

Mates and mortgages

Co-buying is soaring in popularity, with dozens of mortgage lenders offering various 'mates' mortgage' deals, allowing you to use the income of up to three friends in order to boost borrowing capacity.

A joint mortgage means you are both/all responsible for mortgage payments - if any of you is unable to pay for any reason, the payments still have to be made by the remaining joint owners. A typical example of what a mortgage provider will lend is three times one person's salary plus one times each joint owner's salary. This formula varies and every group's situation is different, e.g. some joint owners may have money from parents.

Bear in mind you will need to ask your solicitor to register you and your friends on the property deeds as 'tenants in common', rather than 'joint tenants'. This way, if you die prematurely, your part of the house will go to an assigned beneficiary, rather than straight to the other owner/owners.

Pros:

• Lowers the amount of deposit needed and your monthly costs
• You can share the initial costs, including solicitor's fees
• You are investing in the future rather than paying rent
• You may be able to shorten the term of the mortgage, therefore saving interest
• You share household bills, housework etc
• It may allow you to buy a more desirable property in a more attractive area
• In many cases, sharing costs can work out cheaper than renting

 Cons:

• Mortgages are not to be taken lightly - you'll have to trust your co-buyers completely
• Experts warn groups of friends living together are 'unstable' households because they are more likely to experience conflicts of interest
• One or more of you may wish to sell before the others
• You need legal documents to protect your investment, which means additional costs
• You might need mortgage protection and life assurance
• House prices, as we have discovered, don't always go up
• The process is bureaucratic - you will need accurate records to keep track of payments etc

Come together

Suzee Taylor, 23, recently bought a two-bedroom maisonette on the outskirts of Brighton with her friends Kate and Jack for £165,000. "I figured out it would take me about five years working my butt off to afford the deposit on a one-bed flat," she said.

"Two good friends from uni, who are a couple, were struggling to find somewhere they could afford and the idea just clicked. We were scrupulous about talking every detail through and got everything sorted after numerous meetings with our mortgage adviser and solicitor.

"The planning and buying process was stressful, but we're having a great time and we've invested in our own futures instead of lining a landlord's pocket," she said.

Buddies online

If you're single and wanting to get onto the property ladder but don't have a friend or family member to join forces with, there are several websites where you can meet your co-buying buddy online. The first of these was www.sharedspaces.co.uk set up in 2005 by Richard Cohn.

It offers advice on affordable housing and has a free co-buyer network where more than 2,500 members can check each other out as potential mortgage buddies. "I flatshared for years before buying and made some great friends; it got me thinking, 'If you can flatshare with complete strangers, why can't people take it to the next level and buy together?'"

Of course, buying is a far bigger financial commitment than renting, but Richard says that with the correct legal framework (a 'deed of trust', costing roughly £200 to £500, to protect your rights); mortgage protection (to insure against any of you losing your jobs or becoming too ill to work); and time (as much time as you need to get to know your potential co-buyer well enough to call them a friend or a business partner), there's no reason why you can't have a successful co-buying experience.

Updated: 25/05/2010

By Elizabeth Nicholls