Higher house prices and stricter lending criteria by the banks have pushed homeownership out of reach of many ordinary South Africans on a single income. But if you really wanted to own a house would you be prepared to share the responsibility with a friend?

Dieketseng Maleke wants to buy a house so that “instead of renting and paying somebody else’s bond, I’ll be paying my own bond.” However she has decided to buy a house with her friend as it is more affordable and will allow her to maintain her lifestyle, “I wouldn’t qualify outright for a home loan. Even if I qualified, I would be broke by month end after my monthly payments and I don’t want that. I want to be able to maintain my current lifestyle and still have entertainment,” says Maleke who is joining a growing trend of would-be homeowners who are entering into partnerships to buy a home after finding that they have been priced out the property market.

A recent salary survey by Career24 found that the average salary in South Africa is R16 586 per month. According to Absa House Price Index the average price for a small house (80sqm – 140sqm) is R684 000. Based on FNB’s online bond calculator the repayments would be R8480 per month. In order to qualify for that level of mortgage bond you would need to earn R28 268 before tax – this is 75% more than the average income. In fact on a salary of R16 586 a person would only qualify for a mortgage of R387 141. Therefore for most South African’s homeownership may only be possible through combining incomes.

While this may be a solution, it is a long term commitment that can have serious financial implications should the partnership fail; one needs to think this through and carefully weigh the consequences.

FNB CEO Housing Finance, Marius Marais says the bank has handled several of these types of transactions. Although they remain relatively rare, the bank has never had an issue and all the deals have been successful so far.

However he cautions that one should be careful before entering into such an arrangement. “You need to be aware that you are both liable for the loan and should one party fail to make a payment and the bank decides to repossess the property, you will both suffer the consequences. You also need to understand that when you enter such an agreement you are responsible for the total amount of the loan as you are jointly responsible for the bond”. This means that if you decide to sell the property, you will equally benefit from the profit made, even if the other party did not commit to making payments. If there is a default in payments you are both liable for the unpaid amount, if your partner cannot make them, the bank can claim the full payment from you.

Maleke says that in order to ensure that the agreement is solid they decided to go to a lawyer who will draw up a contract. “I trust my friend because I have known her for a long time and she’s more like a sister to me, I have known her for ten years. Trust is important when you go into an arrangement like this. I trust her because she knows about my personal problems as well and I know she won’t run away,” says Maleke.  Although Maleke’s friend is on contract while she’s permanently employed, she’s willing to take that risk because of their solid friendship. She adds that she would be the principle bond holder in the agreement.

Salvatore Puglia, from Puglia Attorneys, says before entering into any agreement; ensure that you have a strong relationship with the other person. Both of you should be able to repay back the loan. He advises that you need to sign a contract that will clearly state how the bond is going to be paid and what will happen in the event of one party dying or a fall out of the relationship before the bond if paid off.

This contract however, does not give guarantee that the other party will honour the agreement. A Will is also important for this type of partnership. It must clearly be stated in the will what will happen to the property or dependents in case of death. “If the other party fails to honour his/her part of the agreement, parties can negotiate to sell the house in an open market in order to pay back the bank. However if the bank makes a loss in the selling of the property, the bank will send summons to both parties”, says Puglia. This is irrespective of whether or not one party has honoured the part of the agreement while the other has not.

According to Puglia, the contract will not necessarily protect you in case of litigation as the bank will not entertain personal disagreements that you may have, but will look at the bond that you signed jointly.

Marais says one of bank’s requirements is that at least one party should live in the property. He says it is also important that individuals take a joint life cover that will cover their debt in the event of death of one party. The life cover should be equivalent to the loan amount.

This article first appeared in City Press