Safety in Numbers: Things to remember when buying a property with a joint mortgage
As property prices continue to soar then buying a property with a joint mortgage with friends can certainly make sense. The first recommendation is to weigh up the pros and cons of taking out a joint mortgage with others who may be in a different financial situation from you.
When you buy a property with other people (usually referred to as joint tenants or as tenants in common) you need to choose how it is going to be owned, who will be paying for it and what they are paying.
In truth, there are many considerations so this article looks at some of the most important points to remember when buying a property with friends using a joint mortgage.
For example, a lender will look at everyone’s circumstances, including their credit score, debts, commitments and regular spending before approving a joint mortgage, meaning you will all be jointly liable for the mortgage repayments – so if one of you cannot pay, the others will need to make up the full amount.
What is the deposit you can all afford?
The most common reason a group of friends club together to buy a property is because so few buyers are able to afford a deposit on their own due to the high cost of property. How you share the cost of the deposit is entirely up to you.
Typically, it can take eight years for a first-time buyer to afford a deposit to buy a house.
You may want to split the deposit evenly or some might only be able to contribute a certain amount, but whatever you decide ideally you should aim for 5 to 10% of the cost of the property and remember, the higher the deposit the greater choice you will have when it comes to mortgage options (and the repayments will be considerably less).
“We are seeing an upturn in enquiries from first time buyers eager to step onto the property ladder, with some clubbing together to buy with friends. This seems like a smart option given the recent increase in property prices.”
Plan for the future
Buying a property is probably the largest single purchase you will ever make so you need to be sure you can afford it in the long term, and if there are several of you buying together, be sure you are capable of making the payments in the short term and in the future.
This is where you need to be savvy. We recommend that everyone draws up a list of their outgoings against their income to see what they can afford on a monthly basis. Include essentials like utility bills, travel costs and phone charges etc, as they all add up and make a huge difference.
Ask for help
There is plenty of help out there for first-time buyers so make sure you do thorough research into what advice and assistance is available to you. The Help to Buy scheme is a good starting point if you are planning to buy a new build, and your bank should be able to advise you on what sort of mortgage you would be entitled to. It is worth remembering that individual mortgage holders, and not just one person in the group, who are thinking of buying a house will need to meet the lending criteria set out by the mortgage provider.
Talk to a mortgage lender
Talking to a mortgage lender will help narrow down different mortgages available to you and your group. Types even include a guarantor mortgage which allows you to apply for a joint mortgage with members of your family which might enable you to afford a larger mortgage and access a wider range of mortgage deals.
Make sure you find out if there are restrictions on the number of owners who can be involved and discuss all possibilities with a mortgage lender before approaching a conveyancer. Having everything in place when you get a conveyancing quote will help to speed up the buying process.
Investigate the hidden costs
As you might be aware, the deposit and the monthly mortgage repayments are not the only costs of buying a property, whether it’s as an individual or as part of a group. There are add-ons which must be considered before taking your first step on the property ladder.
- Mortgage and valuation fees
- Stamp duty
- Solicitor’s fees
- Removals and insurance
You and everyone in the group will need to check that you have enough left over to cover these hidden costs.
Talk to a conveyancing specialist
Not all conveyancers are the same. We recommend you look for an expert who is friendly and who you feel you can talk to. They should be there for you at the end of the phone (or on email) when things suddenly change, which can happen to anyone buying a home.
At Hillyer McKeown, our award-winning conveyancing team has guided many buyers through the often confusing and sometimes chaotic conveyancing process. We look for ways to minimise stress, speeding things up where we can, while looking after our customer’s best interests – particularly for first-time buyers who appreciate the extra time we take to make sure their transaction is handled right.
In short, we want what you want: to successfully buy a home!
What to do next
We are always happy to talk to people who are looking to buy their first home – we take pride in explaining the conveyancing process in plain language, ensuring each aspect is covered.
We wish you all the best in finding your ideal home.