Share a Mortgage and save thousands in rent
First-time buyers typically spend around £42,000 renting over seven years before owning their own property, according to research from Santander mortgages. For an average UK house worth £250,000 they will also have had to secure at least a £25,000 for a 10% deposit.
Watch out for Landlord rent increases
Many commentators have noted the less obvious further costs within the rented sector. Landlords can for example, using six-month contracts, impose two rent increases per year. Santander’s study also noted that tenants generally might only expect to receive 39 per cent of security deposits back from landlords at the termination of a contract. Landlords withhold some £130 on average, according to the research.
With rents becoming the same cost as buying, you may be better off getting on the property ladder and there are plenty of affordable options available especially with some competitive Mortgage Interest Rates.
There are competitive Mortgage Interest Rates, but not at a LTV of 95%
Industry sources have played up the competitiveness of the mortgage interest rate market at present, while still noting the importance to potential homeowners of securing as large an initial deposit as possible. The difference in Mortgage Interest Rates is considerable and can be costly if you have a small deposit.
A 5% deposit will get you a costly 4.99% Mortgage Interest Rate (95% Loan to Value 'LTV') from Natwest under the Help to Buy Guarantee Scheme; whereas with a 10% deposit you can benefit from a competitive interest rate of 4.29%. The real key savings and the best mortgage interest rates are when you can raise a 20% to 25% deposit.
Look at this graph that shows the amount of interest you pay in the first 2 years on a property purchase of £200,000, with a 5% deposit and a 4.99% mortgage interest rate, compared to the competitive mortgage interest rates for a 10% deposit at 4.29% and a 25% deposit at 2.75%.
The difference between a 5% deposit mortgage interest rate and a 25% is £10,544 over 2 years. This will go into the £100,000s over the full life of your mortgage.
But I can’t afford a 25% deposit; or can you?
The difference in the amount of interest you pay and the monthly mortgage repayments makes getting a lower loan to value the winner, but what if you can’t afford 25%? Share a Mortgage has the solution.
We have a community of homebuyers looking to buy properties together; share the deposit, mortgage, legal and on-going living costs. In the above example, if you invested with 3 other person who had a 6.25% deposit (12,500 on £200,000), you would have a 25% deposit and better still, instead of paying the full mortgage repayments on your own, they would be split 4 ways, along with all of the other costs like legal fees, council tax, electricity, insurance.
What legal agreement do you need?
When buying with another person, it is essential to have the arrangement documented to protect the joint owners. This is a legal document that is drafted by solicitors and should include a Cohabitation Agreement and a Deed of Trust.
Want to club together, but don’t know anyone? Share a Mortgage can help
Share a Mortgage has a community of homebuyers looking to partner up with lime-minded people to buy a property together. Whether you buy as friends, family or with a Mortgage Buddy you met through Share a Mortgage, our Independent Mortgage Advisers will help find you the best Mortgage Interest Rate and then our friendly Conveyancing Solicitors will handle the legal work for you.
What is Shared Ownership Protection?
Shared Ownership Protection is a legally binding contract backed with support and guidance services that protect couples buying a home together. When buying a property with someone else it is essential you protect your share in the property, even if you think it is shared equally, it might actually not be. Shared Ownership Protection ensures every owner has their own interests to protect so that if the worst happens, you can walk away with your share of the property.
Read our other related articles:
1. Leaving a shared ownership property
2. Cohabitation Agreement is Essential for Unmarried Couples
4. Shared Ownership Protection Explained
Call us on 0207 112 5388 or email help@shareamortgage.com to find out more.
