Joint Property Ownership - Is a mortgage buddy for you?
Friendship is a term people use all the time, but it means very different things to different people. Some may reserve the word ‘friend’ for a small group of people they can count on one hand, whereas others may class 1,000s of connections made through social networks as their ‘friends’.
But how many ‘friends’ would be willing to share the biggest financial commitment of their lives? Surprisingly, quite a few.
It's very popular now for first time buyers to boost their buying power by looking to their friends for a ‘mortgage buddy’. In fact, some mortgage lenders actively advertise buddying up with friends and family to make buying a home more affordable through joint property ownership. Many first time buyers look towards co-ownership as a mutually benefiting business arrangement where they can get onto the property ladder, gain from an increase in property value and back up the arrangement with a legally binding document, in style of a Declaration of Trust, such as Shared Ownership Protection, Share a Mortgage's unique joint ownership agreement.
Below, we look at a few of the essential matters you should think about if you are considering buying a property in this way. Joining Share a Mortgage has many advantages for you should you want to find out more; not least, we offer a safe and secure platform to meet other people with similar property buying aspirations. For more information, please call 020 7112 5388 or click to Join Share a Mortgage Online.
For many, joint property ownership is the only way they can afford to buy. It allows first time buyers to get a foot on the property ladder and pay into something that is for them, rather than wasting money renting and paying off someone else’s mortgage.
If you are considering joint property ownership you need to think seriously about the pros and cons for you as an individual and agree all the ‘rules’ upfront. People's situations inevitably change, so buyers need to be prepared for this, and should discuss as many eventualities as possible. A document such as Shared Ownership Protection aids particularly here in setting down what sharers will do should conditions become adverse for any reason.
So do you have a friend you’d share a mortgage with? Here are five things you should thinkabout if you are considering it:
1. Sharing a mortgage isn’t for life
It’s best to look at sharing a mortgage in the same way as a business relationship. You decide how the business is going to run and agree a clear ‘exit’ point when you are going to sell. As in a business, you share any increase or decrease in the property value and with a clear exit strategy, co-owners can work towards this date. Usually most mortgage buddies will move on after a few years taking any increase in property value and buy a place on their own, or with their love interest.
So when you are choosing a mortgage buddy, don’t think, ‘can I live with them forever?’ Think, ‘can I live with you for a few years while I get myself on the property ladder?’
2. Stay secure and in control
People have been safely meeting new people on dating websites for years; in fact they estimate 50% of new relationships will be found this way within 20 years. However be sure never to give out any personal information to anyone straight away.
If you are using online sites such as Shareamortgage.com to find a buddy, make sure you protect your personal details by staying within these sites. Communicate with potential buddies by using the secure platform provided and only once you are ready, pass on your mobile number to talk to them. Don’t feel rushed into doing anything you don’t want to do.
3. Shared Ownership Protection
Buying a home requires a lot of thought and having a legal document to protect co-owners is incredibly important. As with anything, you never need something until you really need it. When you find your perfect mortgage buddy, make sure to talk about how you are going to live together, set down house rules and document them. A legal document focused on co-ownership is the Shared Ownership Protection available from Shareamortgage.com.
4. Be flexible
You may not be able to afford the palace you initially dreamed of, or live on the exact road you wanted so it’s always a good idea to be open to new ideas and different options. Make sure you take the time to discuss what you want, as well as listening to those of your mortgage buddy. Be clear on what is acceptable to you and what is not. However, just remember, without each other you wouldn’t be able to buy a property.
5. Stay on top of your finances
From the outset you both need to be clear on what you can afford, not only as a deposit but in terms of the ongoing maintenance of the property. Make sure you both have your finances in order and that you can afford the bills.
You need to be fully aware of each other’s financial situation before committing to purchasing a property together. Remember, no lies or secrets. They will only come back to haunt you later. Additionally, it is worth checking your credit rating and credit score to ward off any nasty surprises as you move towards approaching a lender to ask for a mortgage.
Naturally you should shop around to get yourselves the best mortgage interest rate possible to lessen your future repayments. There are other strategies that may work in tandem as well; the Government has its Help to Buy scheme, either Equity Loan or Mortgage Guarantee, which can enable you to buy a property with much less deposit up front.
You should also hire a conveyancing solicitor with experience in joint or shared ownership. They are more likely to know what to expect in these branches of conveyancing and to prevent anything unexpected from happening and costing you more than you need.
Buying a property is an exciting time. You’ll never forget the feeling of taking down the‘for sale’ sign and enjoying sleeping in your own home for the first time. Sharing that elation is now commonplace and means you’ll be able to get onto the property ladder sooner, rather than later.
Written by Andrew Boast, co-founder, Share a Mortgage
Read other related articles:
1. Leaving a Joint Ownership Property
2. Get a Joint Ownership Property and save thousands in Rent
3. Pros & Cons of Joint Ownership
