The Definitive Guide To Mortgage Sharing
Getting on the property ladder can be tough. After ten years of house prices rising faster than wages, for many people buying has become less affordable. So, first time buyers have had to look for ever more imaginative ways to buy their first home.
Shared mortgages have become an increasingly popular method of getting on the property ladder in recent years. Since the turn of the 21st century, more and more people have joined forces with each other in order to afford a mortgage on their dream home.
Many lenders will allow up to four borrowers on the same mortgage and will typically lend around two and a half times the total salaries of the joint applicants. However, as with many financial products, a shared mortgage is a great idea for some, but not for others.
When buying with friends or colleagues, it is vital that you avoid potential problems later on by ensuring the contracts are clear out the outset. Make sure that all contractual obligations are understood from the start and that you know what you are getting yourself in to.
For example, if one of the parties fails to pay the home loan, every other party is collectively and individually responsible for paying the mortgage. Of course, this can create a huge problem if you are buying with friends and can irreparably damage your friendship. Make sure that you understand the repercussions of someones failure to pay and that you have arrangements in place for such an eventuality.
Another potential pitfall with a shared mortgage is that your circumstances are likely to change in the future. One of the joint parties is likely to want to settle down with a partner at some point, or may be forced to relocate because of their job. Whilst a shared mortgage may suit young people who have not settled down, your circumstances can quickly change.
Make sure also that you enter into a formal agreement about how the property should be divided between the joint applicants. You can either divide the mortgage and property into shares in common or as joint shares.
A joint tenancy divides the property into equal shares distributed between the owners. Shares in common means that each property owners share of the property is decided by them. Whichever way the property is divided, these choices offer substantial legal protection for each party in the event of their death. It means that their share of the property can be distributed according to their wishes.
A mortgage is still beyond the financial means of many thousands of people and so a shared mortgage can be a viable method of getting on the property ladder. With rising house prices, pooling salaries can be the only way to secure the mortgage you need to buy. However, a shared mortgage can test the strength of your friendship and so it is important that it is not a decision you take lightly.
With the correct advice and the right contracts in place, a shared mortgage can be a great way of getting on the first rung of the property ladder.
About the Author:
Howard writes for Just Commercial Mortgages the UK's No1 site for the latest commercial mortgage rates and commercial property finance news.
Article Marketing
15 people like this article
