Buying a house with your friends and applying for a mortgage in the Netherlands, how does it work?

How exciting is it to buy a house with your best friend(s)? In times like these, in which the housing market has completely dried up, it can be a good idea to buy a home together with your friends instead of renting a house. Our experience is that it is increasingly common for friends or befriended couples to buy a house, villa or residential farmhouse together.

Buying a house together enables you to add up your wages and the result is that you can look in a different (and less competitive) price range when looking for a house. It is also possible to split up the property in the future and end up with separate houses which can be sold by itself when needed. The splitting of property is especially relevant in the larger cities where it is common to split up monumental houses and we have the expertise to help you with this process.

Furthermore, we frequently help befriended couples with the purchase of a residential farmhouse. This type of house is also very suitable for dual occupancy and dividing the property in the future.

What is the maximum limit of co-owners?

There is a limit of four co-owners when you purchase a house and it is possible to add up all wages. However, in the mortgage application the first earnings count for 100% and the second earnings for 90%. Starting 2023 the second earnings will also count for 100%. Not every bank is eager to supply a mortgage but luckily we have experienced advisers who can help you out. We know the rules and regulations of the bank and are able to inform you about the available options.

We help both friends as well as befriended couples who wish to buy a house together.

Buying a house together

As discussed earlier the upside of co-ownership is that all earnings can be included in the mortgage application. The total amount of the loan depends on the policy of the bank. Not every bank permits a construction of a co-ownership of more than two people.

What options are available in a co-ownership?

There are a few options available and the first option is that each person (or couple) has a stake of 50%. The alternative is partial rent: one person buys the entirety of the house and the other person rents a room. However, this does not fit into the policy of most traditional bank loans. There are often additional rules and restrictions in place regarding the maximum amount of the loan or in some cases a penalty in the shape of a raised interest rate.

Managing expectations when buying a house and making arrangements

Every (co-)owner and mortgagor is responsible for paying back the mortgage. This is what we call joint and several liabilities and the bank can address every person mentioned on the deed of mortgage. It is recommended to make arrangements in case of unexpected circumstances and a notary can help you organize this in an official document. Examples of (unexpected) circumstances or life events:

• Unemployment or incapacity (when you cannot work at all or in part due to sickness or disability);
• A divorce or end of a relationship;
• Plans to move;
• Mutual arguments;
• An addition to the family / having children;
• A new partner.

It might not be comfortable to discuss these topics in detail with your friends but it is very important to manage expectations in case of the aforementioned life events. You can prevent a lot of trouble in the future when you have a notary prepare an official document. For example, you can include that the first right of purchasing a house (after a breakup or divorce) passes to the remaining co-owners and you can make arrangements regarding the home evaluation.

If you are going to buy a house together with your friends you will also have to keep in mind that there are additional costs you have to pay to acquire the house (taxes, financial/mortgage advice, the services of the notary, etc.).

Another example of arrangements you can make are in regard of the minimal amount of time you have to live together. If one of you decides to move out rather quickly you could be stuck with a residual debt. To counter this you could document a mandatory time of living together for 5 years. After this period of time a fair part of the mortgage will be paid for and hopefully the value of the house has increased. This will soften the blow financially when you have to sell the house in case of an unexpected circumstance happening.

Room for individual choices in the structure of the mortgage
It is possible to cater to everyone’s specific wishes and situation and divide the mortgage into different parts. Each part allows for a different fixed interest period or mortgage form (for example annuity, linear or installment-free interest-only payment). Furthermore, dividing the mortgage into different parts also allows every buyer to retain their right to mortgage interest deduction.

In the future, when selling the house for example, the splitting of the mortgage also makes it easier to see what everyone’s share has been in repaying the mortgage. On top of that, if one of the co-owners wishes to make an additional repayment it will also be easier to document.

Another possibility is to the divide the mortgage and let it correspond with the co-ownership stakes when they are different from the usual ratio of 50/50. In short, there are lot of solutions tailored to your personal situation. Buying a house together with friends is possible and something we can recommend.

Owner carry agreement

During the mortgage consultation we will also discuss the possibility of drawing up an owner carry agreement. In this document it is possible to register individual tax and mortgage parts. The agreement is an extra document in addition to the mortgage.

An owner carry agreement is especially useful when you have a different starting point from the other (future) co-owners, for example: some people already have (had) a mortgage, contribute more savings buying a house or have different assets. In that case we can help you make the right choices and supervise the contact with the notary of your choice. This is also a very important part of the process of buying a house together and will be discussed in detail during the consultation.

Benefits of purchasing a house together with your friends

In summary there are the following advantages to buying a property with your friends:
• You can stack your income and assets which makes it possible to look for a house at the higher end (price range) of the housing market.
• Paying for a rental property on your own can be very expensive. When you have co-ownership of a house you can split the costs with your friends.
• A lot of people find it more enjoyable to be at home together in the evenings and spend time quality time together.

The downside of purchasing a house with your friends

Needless to say there are downsides to buying a house together:
• The tax-laws and bank will see you as partners which means you have insight in each other’s finances such as current loans, income and differences in assets.
• To prevent iniquity it is important to set up house rules. Who uses what in the house and how will you distribute housework? Irritation and arguments can be avoided by making the right arrangements.
• Earlier we discussed joint and several liability. In case of unemployment the others will be involved as well. The bank expects you to pay back the mortgage monthly and when you miss a payment every co-owner is responsible.

Dividing the property

As soon as you sign the purchase agreement you have to think of and make arrangements for dividing the property legally. As we discussed earlier this is not mandatory but it can help prevent issues from occurring in the future. As it happens, it cannot be ruled out that one of the co-owners decides to move out of the house. Another important thing to keep in mind is that not every house can be divided and the municipality has to consent first.

Sometimes it is also possible to finance a renovation if the house after rebuilding is fit for dual occupancy. This makes it possible to buy and live in a house before any formal division of the property.

We helped a lot of clients with the wish to buy a large townhouse or a residential farm and supervised the dividing of the property and the registration in the land registry. As we mentioned earlier, splitting the house beforehand makes it less stressful when one of the co-owners wants to move on and out. After all, they can sell their part of the property without having discussions about the worth of the property.

Selling your current house

It is possible to appeal to the surplus value of the house(s) of you and your friends and use them when buying a new property.

Intended use of the (new) property

It is not uncommon to want to buy a residential farmhouse together with your friends. These type of houses are suitable for large families, especially when you consider the size of the house and land. However, a downside of a residential farmhouse is the registered use of the property with the municipality. A lot of these houses are registered for (partially) agricultural use. We have more than sufficient experience with this type of house and this does not have to be a problem either.

Buying a second home with your friends

There are possibilities to finance a holiday or second home. Starting 2023 the property transfer taxes of a holiday or second home are raised to 10,4% of the purchase price. Keep in mind that the purchase costs of acquiring ownership of the house are a lot higher in that case.

Taxes

We also have the expertise to help you with matters regarding taxes, for example when you want to know in what cases you are (not) entitled to interest reduction.

What can we offer you?

We can offer you a swift insight (“quickscan”) into the possibilities of financing your plans. We can help you with applying for a mortgage, work nationwide and we have years of extensive experience in this area and subject. On top of that we have a large network of specialists at our disposal.

Specifically, we can offer you the following services when buying a house together with your friends or family:

• Schedule a technical (building) inspection;
• As well as a home valuation report according to the rules and regulations of the bank;
• Advice about changing the intended use of the property and/or dividing the property;
• Financial advice and applying for a mortgage to make the purchase of the house a possibility;
• Insurance advice on insuring the property (and other non-life insurances);
• Guidance in the process of buying the house and negotiation;
• We offer our services under the principle of “no cure no pay”;
• If you wish to purchase a house together with family we can help you applying for a mortgage suitable for intergenerational homes.

Are you thinking of purchasing a house together with your friend(s)?

Get in touch and we will set up an online introductory meeting in no time. It is also possible to schedule a meeting in the evening!