Traditionally, when thinking about taking on a mortgage with someone else, most people picture a couple. Increasingly, however, friends or siblings are sharing the costs of a mortgage when they buy their first home together.
Stronger together
A joint mortgage is the most popular way for first-time buyers (FTBs) to fund their home purchase, with more than six in ten opting for one. [1]
Buying with someone else means you can split the costs, including saving up enough money to pay the deposit, which is one of the biggest hurdles for FTBs. Sharing the mortgage allows buyers to divide the burden. Likewise, monthly payments can be made jointly, and your combined earnings will be used to determine how much you can borrow.
Legal ownership – joint or tenants-in-common?
A shared mortgage works the same way as a normal residential mortgage, with lenders usually allowing groups of up to four people to apply for a shared mortgage. The big decision is whether to be joint tenants or tenants in common:
Joint tenants essentially act like a single owner. You all have equal rights in the home, you split the profits equally when selling and, should one owner-borrower die, the others will inherit their share (so there are legal aspects to consider).
Tenants in common have separate interests in the whole property. This means that you can choose how to split the ownership, with one person, perhaps, paying a bigger deposit in return for a bigger share of the value when sold.
Trusting each other
Before applying for a shared mortgage with a group of friends, make sure you understand fully the commitment you are taking on. For example, if one person is unable to keep up with payments, the others must cover the full amount.
[1] Halifax, 2023
🚨 Data accurate as of the date of publication –10.08.2023
🚨Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
🚨 The above material is for informational purposes only and does not constitute a sales offer or financial advice. Before taking out any insurance, credit agreement or other financial product, you should obtain individual advice on your requirements and the general terms of the contract.
Source: Quilter Financial Planning – Essentially Mortgages Q3 2023
