Mortgages. Buying with friends: Your entry level to the property market
Most people are used to sharing accommodation as students,
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Jane Harrison of London & Country Mortgages says, "Lenders generally take a pragmatic view of friends buying together and it is relatively easy for both to obtain loans of three times salary. But.one needs to go into it with very realistic views."
The maximum number of names on a mortgage deed is legally limited to four. But, ( home insurance quotes ) in any case, lenders take a dim view. "If you have three people together, it doesn't help much in what you can borrow," says Charcol's Mr Boulger.
Lenders will take the best of two incomes and multiply that by three or four times. The third income will only be multiplied once.
Legally there are two types of joint ownership. You can either own the ( personal loans ) property as 'joint tenants' or as 'tenants in common'. What ownership type you opt for depends on your particular circumstances and reasons for buying.
Under the 'joint tenancy' agreement the joint owners together own the whole ( secured loans ) property and do not have a particular share in it. If one of the owners dies, the other will automatically become the sole owner. This would apply even if a will had been made leaving the deceased owner's 'share' to someone other than the co-owner.
The opposite of joint tenancy, 'tenants in common' means that each have a definite ( life insurance quotations ) share in the property. This would be the most appropriate option if you wanted to own a property in separate pre-determined shares.
Under this form of ownership if one of the owners dies, his share of the property will pass on to whoever he specifies in a will, or if a will is not made, in accordance with the rules of intestacy.
Once you have decided on an ownership tenancy, the first things you need to ( medical insurance ) consider are how much you can borrow and what is the most suitable mortgage for your circumstances.
You next need to consider carefully who you are investing with and should put measures in place to protect your investment.
Mortgage broker Ray Boulger of Charcol recommends co-buyers ask their conveyancing solicitor to draw up a legal contract. "We would always advise proper legal documentation where you buy as "tenants in common" which should detail what happens if either of you want to move on. Remember that if you buy together, each person is jointly and severally liable for the mortgage - even if you own just 25%, if your co-buyer defaults, you are responsible for the entire mortgage."
To make the joint property investment work you will need to:
- Feel that the person you have chosen to invest and live with is trustworthy and is someone you could get on with
- Draw up a trust deed, or declaration of trust, and cohabitation agreement that you are both/all happy with
- Be reasonable with each other, discussing and settling any possible areas of dispute
- You will each be putting down separate deposits on the property. You will probably want to set up a joint bank account from which the mortgage payments and perhaps other household expenses are paid.
- How the profits from the house are split when you come to sell.