First-time Buyers

First-time buyers urged to look at joint ownership

Your Mortgage
Written By:
Your Mortgage

Estate agents suggest that aspiring first-time buyers should consider getting together with friends and family to secure their first step on the housing ladder.

First-time buyers having difficulty getting onto the housing ladder are being urged by estate agents to consider pooling their finances with friends and family in order to buy their first homes.

The National Association of Estate Agents (NAEA)’s housing market statistics for October 2012 showed a month-on-month drop in the number of first-time buyers coming into the market, accounting for 20% of sales, compared with 23% in September.

Mark Hayward, president of the NAEA, said:

“This latest data from our October market report shows that the situation for first-time buyers isn’t getting better anytime soon. While Government housing schemes such as Firstbuy and Newbuy are in place, they are failing to meet demand, with only 250 people signed up to Newbuy in the first four months of its operation.

“Joint ownership can, in the right circumstances, offer a way of avoiding the high costs associated with buying a property. By splitting the deposit, maintenance fees and mortgage repayments, this could make owning a home a more realistic aim for many would-be first-time buyers.

“It is important to remember, however, that this option requires a lot of trust, transparency and above all good planning. With a house likely to be the biggest purchase of a lifetime, there is a real need to view it as a business arrangement to avoid problems after moving in.”

For anyone considering a joint ownership arrangement, the NAEA recommends the following:

Consider your mortgage options

There are mortgages that exist specifically for this type of purchase, so shop around for the best deal. Remember that, with a combined income, it may be possible to attain a mortgage of higher value, giving you greater choice of properties

Think about the worst case scenario

One of the benefits of buying with friends or family should be a high level of trust, but that shouldn’t be to the detriment of legalities. Consult lawyers about a legally binding co-ownership contract and agree in advance what will happen if one owner’s circumstances change

Don’t forget who owns the TV

Drawing up a comprehensive inventory of non-shared items or other costs, and keeping a note of who pays for things like paint, at the start of the shared ownership can reduce confusion months or years down the line. This should also help if one party decides to move out

Keep paperwork in order

Remember, this is a business transaction, and any paperwork relating to the property or mortgage must be in the names of the co-buyers. Ensure copies are made of all documents associated with the purchase to allow them to be readily accessible to both parties

Set a realistic timeframe

If you are buying with a friend it is likely that the relationship is, ultimately, temporary. For this reason, co-ownership should always be treated as an investment decision and buying a house with a good potential resale value makes sound business sense.