The Growing Popularity And Need For Shared Mortgages.
The last 20 years has seen a huge increase in property values, meaning that many first time buyers are unable to get onto the property ladder in the traditional way. This has led to them finding new ways of buying a 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.
In reality this type of financial commitment can work for some and not for other. As with most things in life going into a shared mortgaged needs to be done with eyes wide open. Mortgage lenders can allow multiple applicants to collectively mortgage a property, and can offer two and a half times the collective salary pot in cases where other criteria are met. This will obviously vary by circumstances and on a case by case basis.
Make sure that you read the contract thoroughly before signing, and ensure that you know what you're entering into. There may be certain clauses that make it difficult to get out of so you need to know it all beforehand.
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 someone's 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.
Know your stuff too - there are different ways in which to purchase a property. You can buy as tenants in common or in joint names. The rules are slightly different on each in terms of what happens if someone dies so you need to be aware of these differences and decide what's best suited to you as a group accordingly. It may be an idea to talk with a financial adviser to ensure you're well advised on what happens in certain circumstances.
The difference between these two types of shares is that with shares in common means the owners have a share in the property which is proportionate to the size they want (i.e. how much they have paid for or own) whereas with joint tenancy the property is owned equally between the tenants. With these types of legal agreements and as you would expect there is significant protection for each party say if one member where to die or want to sell their share of the property.
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.
A shared mortgage can be a useful way of getting onto that property ladder, it could also be fun and interesting living with new and exciting people. And if everybody goes into it with eyes wide open then it would seem to be a really sensible option
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.
In reality this type of financial commitment can work for some and not for other. As with most things in life going into a shared mortgaged needs to be done with eyes wide open. Mortgage lenders can allow multiple applicants to collectively mortgage a property, and can offer two and a half times the collective salary pot in cases where other criteria are met. This will obviously vary by circumstances and on a case by case basis.
Make sure that you read the contract thoroughly before signing, and ensure that you know what you're entering into. There may be certain clauses that make it difficult to get out of so you need to know it all beforehand.
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 someone's 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.
Know your stuff too - there are different ways in which to purchase a property. You can buy as tenants in common or in joint names. The rules are slightly different on each in terms of what happens if someone dies so you need to be aware of these differences and decide what's best suited to you as a group accordingly. It may be an idea to talk with a financial adviser to ensure you're well advised on what happens in certain circumstances.
The difference between these two types of shares is that with shares in common means the owners have a share in the property which is proportionate to the size they want (i.e. how much they have paid for or own) whereas with joint tenancy the property is owned equally between the tenants. With these types of legal agreements and as you would expect there is significant protection for each party say if one member where to die or want to sell their share of the property.
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.
A shared mortgage can be a useful way of getting onto that property ladder, it could also be fun and interesting living with new and exciting people. And if everybody goes into it with eyes wide open then it would seem to be a really sensible option