subject: The Growing Popularity And Need For Shared Mortgages [print this page] The Growing Popularity And Need For Shared Mortgages
In recent times, it has not been easy for young people and first time buyers to purchase their first property, so there has been an increase in shared mortgages to help them to own their first home.A shared mortgage is just as it sounds. It's a group of people clubbing together to obtain a mortgage on a property. Not only do you share the mortgage, you also share the deposit, so if you need a 30,000 deposit and there are 4 of you, you only need 7,500 each.But is it really a good way of getting onto the first rung of the property ladder? Well, in short it works out for some people and others won't see things pan out as they'd expected. Lenders will often accept four people on a mortgage for a property, and they will usually allow two and a half times gross salary of all parties involved.When buying with friends or colleagues, it is vital that you avoid potential problems later on by ensuring the contracts are clear out the outset. Make sure that all contractual obligations are understood from the start and that you know what you are getting yourself in to.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.You can imagine that this type of mortgage will be suited to those who lead a singles life and that those who are sharing the mortgage are of a similar background or circumstances. Though it would probably be best to expect that at least one member of the group will have their circumstances change during the period of the mortgage. This could be relationship or work related.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.A 'joint tenancy' divides the property into equal shares distributed between the owners. 'Shares in common' means that each property owner's share of the property is decided by them. Whichever way the property is divided, these choices offer substantial legal protection for each party in the event of their death. It means that their share of the property can be distributed according to their wishes.Entering into a shared mortgage is a fantastic way to get onto the property ladder, as in the current climate many people, especially young people just can't afford to do it alone. But make sure that you do follow these steps and read everything thoroughly, as tedious as it might be trawling through a 20 page contract. It will save any nasty surprises in the future.This does not by any means mean that it is not a good idea however, as it is a great way for people to make an investment that they would otherwise not been able to afford. Just think about things clearly and responsibly, and make sure you know who you're entering into the contract with.
