Mortgage hunters do it in threes
Two is no longer company and three is certainly no crowd. In fact, three is the fashionable way to go if you want a first mortgage. Thanks to the toxic cocktail of record low interest rates, high inflation and banks demanding ever-greater deposits, wannabe buyers who used to club together with a friend or partner to buy their first home are now seeking two pals to join them in raising the deposit and meeting the repayments.
Take Kristy Gray, 36, who started property-hunting with her fiancé Santanu in July this year before realising that the market was too expensive to buy anything like what they wanted. Her solution was to buy with Santanu and his brother.
“The three of us haven’t lived together before, but doing so means we have a combined deposit of £30,000 and we can all stop wasting money separately on rent,” explains Gray, a website editor currently living in Euston.
“Our main aim is to get us all on the property ladder and keep this initial flat as a long-term investment. As the mortgage will be significantly less than the rent we all currently pay, we are looking at buying and living together as an opportunity to save deposits for our own individual properties.”
The search still hasn’t been easy. “We found a new-build in New Cross for £275,000, but then found that it’s still difficult to get a mortgage of more than 85 per cent loan-to-value on new builds. With no immediate possibilities of raising the additional five per cent we’d need, and not wanting to miss out on the mortgage we've had approved, we are starting our search again.”
With the current economic turmoil expected to get worse before it gets better, group-buying is set to soar in popularity. But interested parties need to take legal advice to avoid facing problems later on.
“Anyone who is joint-buying a property, particularly unmarried couples, needs to consider how to hold the property,” says Edward Goldsmith, chairman of The Conveyancing Association. There are two main options - either joint tenants, where in the event of one owner dying, the property automatically passes to the other, or tenants in common, which sets out the share of the property that each holds.
“Everyone buying a home needs to consider what to do if one is putting in a larger deposit or paying a higher proportion of the mortgage than the other,” adds Goldsmith. “When instructing a solicitor, ask them to set out a declaration of trust between the buyers. That will lay out the parties’ respective financial contribution and what happens in the event of the property being sold - who gets what, and what happens if one of the party doesn’t want to sell? Can the remaining owners buy them out, and at what price? This document sets out the respective partners’ legal positions so there is no dispute in the future.”
If the parties are in conflict about what should happen in the event of a dispute, they should go to two separate solicitors to seek advice - although arguably it suggests that living together might not be very harmonious.