House Sharing Tips Part 8: a sharer may have no deposit funds to bring to the table but the ability to afford their share of monthly mortgage repayments is an absolute requirement.
Happily a mortgage lender's checks are exhaustive so you would not be granted a mortgage with a sharer if that person is, for example, a bankrupt or has an awful credit history. But having the ability to make repayments is not the same as actually making them.
The main party leaders aiming to live in 10 Downing Street in the 2015 General Election similarly must be careful only to associate with potential partners who can demonstrate financial probity.
Parliament's expenses scandal is still only in the recent past, despite a week being a long time in politics, and many people can still remember some of the MPs who were publicly disgrace: Eliot Morley, in today's picture, was actually jailed for 16 months for dishonestly claiming more than £16,000 in public funds.
You can draw up a legally-binding agreement with other sharers which not only sets down what each person has to pay but also sets out what happens if someone doesn't pay their share. This is the best way to ensure that collectively, your mortgage repayments and household expenses will be met.
Need a legally-binding agreement to ensure sharers pay their bills? Find out about Shared Ownership Protection - call 0207 112 5388.
But I trust people to pay their fair share; why make it so formal?
Hopefully all sharers will not only keep their jobs but will also look after their own interests by paying the sums they are individually responsible for. But life is subject to change and there are many reasons why someone might not make, for example, the required monthly mortgage repayments.
People can lose their jobs, face sudden costly responsibilities and expenses, be robbed, be demoted at work, be made bankrupt or, of course be dishonest or irresponsible. These are the situations where it's far preferable to have pre-agreed strategies in place for the sake of the survival of the share and each individual's stake within it.
What strategies can protect me if someone doesn't pay their monthly mortgage repayment?
Central to the agreement is a Deed of trust - this sets down how to calculate what each person's individual percentage ownership of a property is so you can work this out at any point. It is important not least because missed payments are factored into the calculation of an individual's stake.
You might all decide that other sharers agree to make up any shortfall if someone can't make their repayments. But you might decide that this can only last for three months, then the defaulting sharer might face a
forced exit
because they have broken the terms of the agreement. Importantly, should a dispute over repayments go to court, your agreement will carry considerable weight in influencing an adjudicator.
Parliament is full of exhaustive guidelines about how politicians must report expenses. People often obey rules to the letter rather than observing their spirit, but when the scale of blatantly fraudulent behaviour from MPs in recent times emerged, it was clear that some of them had to face criminal proceedings and according to the agreed rules book.
What if I'd never want to take a fellow sharer to court because of the stress?
You should always look to sort out any problems with other sharers with the other sharers themselves, rather than drawing in third parties. However, short of going to court you could also use a dispute resolution service, where all parties to a dispute agree to be bound by an adjudicator's ruling.
How can I possibly prepare for someone losing their job?
You could stipulate in your agreement that all sharers must take out income protection insurance or mortgage protection insurance. There are no absolute fail-safes but at least you would then have some protection.
Share a Mortgage's
Shared Ownership Protection
not only centres on a deed of trust, so everyone can calculate what their share is, but allows you to work out pre-agreed force exit procedures. Share a Mortgage also offers a dispute resolution service in connection with Shared Ownership Protection.
The agreement similarly allows sharers to choose to stipulate, if they wish, that all must have income protection insurance in case they lose their jobs. Its bespoke nature makes it the best option on the market for protecting all sharers in a house share.
