Case study: Buying with friends
He used broker website, sharetobuy.com, to find a mortgage they could all take out together. All four parties are individually responsible for paying the mortgage.
“I was renting for 10 years and just pouring money down the drain. Buying with friends was the only way I could get on the ladder in London,” Nigel explains.
“Each person is legally responsible for paying their share of the mortgage and we have a lot of other legally binding arrangements between us. For example, if someone wants to sell their share, they have to offer it to the three remaining people first. If we don’t want to buy it, then they can sell to someone else, but we all have to agree that we are happy for that new person to buy in.”
Some lenders will calculate the amount you can borrow by taking into account three people’s incomes, but others will only agree to lend multiples of the two highest incomes.
This is the type of mortgage Nigel had to go for. “Share-to-buy mortgages are quite hard to get and it’s also difficult to find a broker who can organise a mortgage for four people, so I’d recommend visiting sharetobuy.com; my broker was extremely helpful,” enthuses Nigel.
The only major downside, he says, is organising everyone to get their act together. “It’s a complex process and it can take a long time to gather everyone’s documents.
“It’s worked out really well for me though the mortgage repayments are so low that I pay £150 less every month than I did when I was renting.”
Nigel’s advice: Buy with people you already know you can live with and make sure your arrangements are legally binding and everyone knows exactly what they are getting into.