Mortgage With A Mate

Friends and even strangers are clubbing together to make buying a home more affordable. It's a small but growing market.

About four years ago a young couple I know bought a flat with one of their old university friends. They shared the cost of a mortgage as it was the only way the three of them could afford to buy into the housing market.

Luckily for them, it worked. They jumped on to the property ladder at a time of rising houses prices and three years later, sold up and each walked away with a share of the profits, which enabled the young couple to put down a healthy deposit on a home of their own. Crucially, the three of them didn't fall out over anything and still remain the best of friends today.

Whether now is a good time for friends to get into the housing market by sharing the cost of a deposit and a mortgage is a moot point -- the market seems to be in a state of flux at the moment and buying with friends will usually be for the short-term, so it would be hard to ride out any potential blips should prices fall.

But for those willing to take a risk, lenders are increasingly willing to consider mortgages with mates.

According to independent financial research by Moneyfacts, more than 60 lenders will now accept applications from up to four individuals. Indeed you don't even have to be friends. There are now websites such as Co-buywithme that introduce potential 'mortgage buddies' to each other although the risk of things going pear-shaped is likely to be much higher if you're clubbing together with strangers.

Unfortunately, many lenders will only take the highest two salaries into account so getting a big enough mortgage can still be a problem even if the monthly repayments are shared by others. Nevertheless, lenders such as Britannia and HSBC are among those who will consider up to four individual salaries.

It is, of course, vitally important to get the paperwork correctly drawn up from the start. Buying a property with friends should be treated as a business transaction. It's important to draw up a contract that expressly details which would happen if one person wants to sell up or finds themselves unable to pay their share of the mortgage.

All co-owners will be "jointly and severally" liable for the mortgage payments so if one person falls behind with the payments, the others will be responsible for ensuring the full amount is paid.

It's also important to ensure that you register the ownership as "tenants in common" particularly if the property is owned in unequal shares. That gives clarity if there is a dispute -- it will be clear what proportion of the property is owned by each partner. Wills need to be drawn up too so it is apparent who should benefit from the relevant portion should one of the co-owners die.

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