People often ask us if there is a way to protect their individual financial interests if they share a mortgage with someone but each sharer has an unequal amount of deposit funds.
Below, we've printed one such question and our answer, which we hope illustrates how you can do just this when sharing a mortgage with others.
If you'd like to know more about our Joint Ownership Protection just call 0207 112 5388.
Question from Margaret Jones about Share a Mortgage with different shares of deposit
Hi Share a Mortgage
Am interested in Share a Mortgage. I present to you my problem and perhaps you can help me.
I am a single 46yrs old mature student re- training in a new career, in further education. My situation is that yes I have savings to help me through my training, but not enough to pay for a full deposit or on-going living costs.
I feel I am at a disadvantage in getting a mortgage so I am in rented rooms at the moment; sharing with 2 other students.
Having met a fellow female student at college who has been given some money by her parents and is interested in jumping on the mortgage ladder. As we have developed a close friendship, we feel secure enough to pool our resources. Neither of us have sufficient funds to go it alone.
My long winded point is, What would happen if, as she has presented the major bulk of money and we find, a few years along, that we are totally incompatible?
Where do I stand, in this situation? Is there any form of joint ownership protection? Share A Mortgage seems a solution, but I need it explained to me, as to how it would work.
Thanking you for your advice.
Yours Faithfully,
Margaret Jones (Miss.)
Answer from Andrew Boast, Share a Mortgage
Hi Margaret,
Thanks for emailing in your question and for allowing us to post this online for others to read.
To answer your question over you both investing different deposit values; this is covered within the Shared Ownership Protection. Within the Shared Ownership Protection, the agreement which gives mortgage sharers the joint ownership protection you mentioned, is a section called the Deed of Trust which is dedicated to stating how much you both invest into the property and how this will be shared when you sell the property. If in the Deed of Trust you invest a 25% share of the deposit and your friend invests 75%, then you'll get 25% share of any of the increase in property value.
If you have bought with someone and you can’t continue to live with them there are lots of ways to either adress the issue or leave the property. The key factor which will affect your decision will be whether you are outside of your initial mortgage term. During your initial mortgage term, you will need to pay an early mortgage redemption penalty if you sell or transfer your share of the mortgage. Here are your options for both inside and outside your initial mortgage term:
Outside Initial Mortgage Term (no early Mortgage Redemption Charge if you sell)
1. Agree to sell the property with your friend/jount owner; or
2. Transfer your share of the property to your friend, or someone else, at market value
In both these situations you will benefit from any increase in the property value and get your deposit back. Of course, property prices can go up or down, so it is always good to sell when the property market is booming.
Inside Initial Mortgage Term (early Mortgage Redemption Charge if you sell)
1. Move out, rent your room and sell/transfer your share as soon as you are outside your initial mortgage term
2. Sit tight, grit your teeth and sell as soon as you are outside your initial mortgage term
3. Speak to your lender and see if they are happy for you to transfer your share to your friend, or someone else, at market value without incurring an early mortgage redemption charge
4. Sell the property and incur the early mortgage redemption charge
I would always stress that selling during your initial mortgage term should be a last resort because of the early mortgage redemption penalty. Living with someone else requires give and take. Share a Mortgage has dispute mediators who can help you with any disputes and this predominantly helps get you back to a happy living environment.
Remember, once you are through your initial mortgage period (normally 2 years) you can sell or transfer your share of the property. This means you will get your deposit back along with any increase in property value.
Buying with a friend isn’t going to be forever and I would see this as a stepping stone onto being able to buy independently, or even with a partner in the future. Always make sure that you are comfortable living with them; however it sounds like you are already sharing a rent, so why not share a mortgage?
Here are the benefits of joining Share a Mortgage today:
I hope this helps, but if you have any other questions let me know.
Kind regards,
Andrew Boast MAAT MIC
