Buyers flock to spread the cost of a home loan
By Sharlene Goff
Published: October 20 2006 14:57 | Last updated: October 20 2006 14:57
Living in close proximity to friends or family often goes hand in hand with petty squabbles, whether it’s concerning the washing up, queuing for the bathroom or debating what DVD to watch.
But more and more first-time buyers are willing to shelve their differences and share their living space for a more affordable step on to the property ladder. According to lenders, record numbers of 20 and 30-somethings are pooling their funds and taking out group mortgages. (AtW: might as well rent
)
HSBC says demand for these types of mortgages, which typically allow up to four individuals jointly to purchase a property and share the repayments, is up by 50 per cent this year. Other lenders, including Britannia and Skipton, are also seeing strong growth in interest.
The main driver behind this increased popularity is the sharp appreciation in property prices. Large numbers of first-time buyers are being priced out of the market, particularly in London, the south-east and other popular cities around the country.
But by taking out a group mortgage, potential homeowners can typically borrow more than they could by going it alone or with a partner and can therefore secure a property that would otherwise have been out of their reach.
Group mortgages are not new or standalone products; typically lenders offer their standard range of mortgage deals and rates to groups of borrowers.
But the amount that groups of buyers will be able to borrow will vary from lender to lender as different mortgage providers adopt different lending criteria.
One new development is that more lenders are willing to consider up to four individuals’ salaries – where previously they might only have looked at two – when they calculate how large a mortgage they can offer a group of borrowers.
Barry Blackshore, senior manager of lending at HSBC, says: “The surge in popularity of group mortgages has arisen because affordability has become such a concern for first-time buyers.”
HSBC, Abbey, Skipton and Britannia are among the lenders who will consider up to four different salaries. These lenders all offer their full range of fixed-rate, variable rate and tracker mortgages to groups of buyers.
Lenders say the number of people taking a group mortgage is still low – perhaps 2 or 3 per cent of all mortgage lending – but it is likely to continue to grow fast.
Colin Dale, head of lending at Skipton, says: “It is really a last option for people who have exhausted other ideas such as parental help with the deposit or a guarantor mortgage.”
These types of mortgages are typically being taken out by groups of graduates and young professionals who may already rent a property together, or by siblings. There are also some websites available that aim to link potential housebuyers looking to share a mortgage. Lenders say they are also increasingly attracting older borrowers whose earnings may not have kept pace with property appreciation.
“We have been quite surprised as demand is not just coming from people entering their first jobs but many people much older than that,” says Dale.
James Cartlidge, mortgage manager at sharetobuy.com, says buying with friends is also a lifestyle choice, as more people delay getting married and starting a family.
However, mortgage experts are conscious that these mortgages are typically higher risk than standard loans.
Tammy Richardson, head of mortgage insurance at Genworth Financial, an insurance company, says: “Relationships between people taking out group mortgages can be more remote than on a standard mortgage, which would typically be taken out by couples or spouses.”
She says that lenders must therefore ensure that if one person on the mortgage were to move on, the remaining borrowers could still afford to take on the remaining stake and meet the higher repayments.
James Cotton at London and Country Mortgages agrees that these mortgages carry extra risk. “Every extra person [on the mortgage] increases the risk that things might go wrong,” he says.
More people sharing the loan could mean a higher chance that someone might miss a repayment or decide they want to sell out.
Lenders are therefore usually more conservative when they come to assessing lending criteria. HSBC scores each borrower individually according to their salary and existing outgoings and then aggregates this.
Other lenders have different ways of calculating what mortgages they can offer. Britannia lends up to three times each of up to four salaries. Other lenders use more complex income multiple calculations. Abbey for example will lend up to twice the salary of the two highest earners in the group and one times the salary of the other borrowers. Most lenders also take into account any outstanding student loans, personal loans and credit cards.
But it is important to note that with these types of mortgages there is a lot more to consider than just finding a property and financing it.
Blackshore says: “It is not just about people’s credit but also about their relationships.”
The vital point is that each individual on the mortgage can be held fully responsible by the lender for the entire loan if their fellow borrowers do not keep up with payments.
Lenders therefore advise that if you are thinking of entering a group mortgage it is with people you know well and trust. It is also important that you do not overstretch yourselves financially, so if someone’s situation changes, the other mortgage holders should be able to afford to cover their share of the loan for a temporary period.
It is also highly recommended that you draw up a legal agreement before you take out the mortgage as there is a wealth of detail to consider. Issues range from who is paying what share of the deposit, who is responsible for what proportion of the repayments and what will happen when somebody wants to sell their share, down to who gets the biggest bedroom.
You can draft all this information into a “declaration of trust”. These types of contracts can be bought off-the-shelf from a number of online providers but it is wise to go to an experienced property lawyer as they can be fairly complex.
----
Just when will lenders learn how to say no? Polling friends' resources together to get single morgage to share house is the biggest load of threaded ever.
By Sharlene Goff
Published: October 20 2006 14:57 | Last updated: October 20 2006 14:57
Living in close proximity to friends or family often goes hand in hand with petty squabbles, whether it’s concerning the washing up, queuing for the bathroom or debating what DVD to watch.
But more and more first-time buyers are willing to shelve their differences and share their living space for a more affordable step on to the property ladder. According to lenders, record numbers of 20 and 30-somethings are pooling their funds and taking out group mortgages. (AtW: might as well rent
)HSBC says demand for these types of mortgages, which typically allow up to four individuals jointly to purchase a property and share the repayments, is up by 50 per cent this year. Other lenders, including Britannia and Skipton, are also seeing strong growth in interest.
The main driver behind this increased popularity is the sharp appreciation in property prices. Large numbers of first-time buyers are being priced out of the market, particularly in London, the south-east and other popular cities around the country.
But by taking out a group mortgage, potential homeowners can typically borrow more than they could by going it alone or with a partner and can therefore secure a property that would otherwise have been out of their reach.
Group mortgages are not new or standalone products; typically lenders offer their standard range of mortgage deals and rates to groups of borrowers.
But the amount that groups of buyers will be able to borrow will vary from lender to lender as different mortgage providers adopt different lending criteria.
One new development is that more lenders are willing to consider up to four individuals’ salaries – where previously they might only have looked at two – when they calculate how large a mortgage they can offer a group of borrowers.
Barry Blackshore, senior manager of lending at HSBC, says: “The surge in popularity of group mortgages has arisen because affordability has become such a concern for first-time buyers.”
HSBC, Abbey, Skipton and Britannia are among the lenders who will consider up to four different salaries. These lenders all offer their full range of fixed-rate, variable rate and tracker mortgages to groups of buyers.
Lenders say the number of people taking a group mortgage is still low – perhaps 2 or 3 per cent of all mortgage lending – but it is likely to continue to grow fast.
Colin Dale, head of lending at Skipton, says: “It is really a last option for people who have exhausted other ideas such as parental help with the deposit or a guarantor mortgage.”
These types of mortgages are typically being taken out by groups of graduates and young professionals who may already rent a property together, or by siblings. There are also some websites available that aim to link potential housebuyers looking to share a mortgage. Lenders say they are also increasingly attracting older borrowers whose earnings may not have kept pace with property appreciation.
“We have been quite surprised as demand is not just coming from people entering their first jobs but many people much older than that,” says Dale.
James Cartlidge, mortgage manager at sharetobuy.com, says buying with friends is also a lifestyle choice, as more people delay getting married and starting a family.
However, mortgage experts are conscious that these mortgages are typically higher risk than standard loans.
Tammy Richardson, head of mortgage insurance at Genworth Financial, an insurance company, says: “Relationships between people taking out group mortgages can be more remote than on a standard mortgage, which would typically be taken out by couples or spouses.”
She says that lenders must therefore ensure that if one person on the mortgage were to move on, the remaining borrowers could still afford to take on the remaining stake and meet the higher repayments.
James Cotton at London and Country Mortgages agrees that these mortgages carry extra risk. “Every extra person [on the mortgage] increases the risk that things might go wrong,” he says.
More people sharing the loan could mean a higher chance that someone might miss a repayment or decide they want to sell out.
Lenders are therefore usually more conservative when they come to assessing lending criteria. HSBC scores each borrower individually according to their salary and existing outgoings and then aggregates this.
Other lenders have different ways of calculating what mortgages they can offer. Britannia lends up to three times each of up to four salaries. Other lenders use more complex income multiple calculations. Abbey for example will lend up to twice the salary of the two highest earners in the group and one times the salary of the other borrowers. Most lenders also take into account any outstanding student loans, personal loans and credit cards.
But it is important to note that with these types of mortgages there is a lot more to consider than just finding a property and financing it.
Blackshore says: “It is not just about people’s credit but also about their relationships.”
The vital point is that each individual on the mortgage can be held fully responsible by the lender for the entire loan if their fellow borrowers do not keep up with payments.
Lenders therefore advise that if you are thinking of entering a group mortgage it is with people you know well and trust. It is also important that you do not overstretch yourselves financially, so if someone’s situation changes, the other mortgage holders should be able to afford to cover their share of the loan for a temporary period.
It is also highly recommended that you draw up a legal agreement before you take out the mortgage as there is a wealth of detail to consider. Issues range from who is paying what share of the deposit, who is responsible for what proportion of the repayments and what will happen when somebody wants to sell their share, down to who gets the biggest bedroom.
You can draft all this information into a “declaration of trust”. These types of contracts can be bought off-the-shelf from a number of online providers but it is wise to go to an experienced property lawyer as they can be fairly complex.
----
Just when will lenders learn how to say no? Polling friends' resources together to get single morgage to share house is the biggest load of threaded ever.
... just as you won't be able to resist mentioning the 'economic benefits' of immigration, having just complained about one of it's many negative impacts on the country...
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