Buy-to-let
Being able to afford to buy your own home can be tough as house prices keep on rising but one option is to share.
It is particularly expensive in London with average house prices skyrocketing to historically high levels at just under £476,000, according to the most recent Land Registry figures to end of May 2015.
This means that someone on their own would need £47,600 for a standard 10 per cent deposit and a £95,200 annual salary to get the maximum mortgage offered by most lenders (4.5 times household income).
However, friends Joanna and Mark were able to buy a property in London, worth £432,000, by pooling their resources, despite neither of them having a salary anywhere near £90,000 per year.
The matching process
Mark had a much higher salary than Joanna, but unlike her, did not have a large deposit sum saved. Joanna on the other hand had a lesser salary than Mark but had a much larger deposit.
Two is better than one – three’s even better
When Joanna and Mark decided to buy together, they also included Mark’s girlfriend in their plans and, using tools including the mortgage affordability calculator on shareamortgage.com’s website, found out the value of mortgage they might be able to secure and how long it would take to pay off. They found that buying was not only affordable, but with Mark’s partner sharing with them as well, they could make paying for all the household bills even more affordable.
Armed with this knowledge, they approached mortgage lenders for a mortgage for a £432,000 new build property in London and were able to get a mortgage through a high street bank.
In Joanna’s own words…
“I was lucky enough to have a large sum for a deposit but was aware that my salary probably wouldn’t ‘cut it’ to buy a property in London.
“I started to ask a number of my friends if they’d be interested in sharing a mortgage with me.
I eventually talked to Mark who was a great match for me: he’d a higher salary but my deposit funds were far greater than his.”
Why choose to share a mortgage and buy rather than continue renting?
“It’s a no-brainer really. Renting is ultimately a waste of money: you pay all these funds to someone else which you never see again. This way, you get to invest in your own future and you might make a capital gain.
“Mark and I see this as a business investment first and foremost – if we can make a large capital gain on selling up in a few years then we will.
“For me to buy in London by myself would otherwise take many years to achieve or even be impossible.”
What if it all goes wrong?
“Share a Mortgage’s Shared Ownership Protection gives us great confidence because we’ve outlined and clarified every fine detail already and have all our strategies in place just in case something goes wrong.
“We fully expect to be friends at the end of our arrangement and we know our individual investment is protected regardless.”
Commemt
Andrew Boast, co-founder of Share a Mortgage, said: “For so many Londoners their chances of buying a home in London are almost zero on their own and this is showing as the statistics for home ownership are on the decline.
“We help and encourage people to match up to pool resources to buy properties when they would not be able to on their own and Joanna and Mark are a classic match: together, they had sufficient deposit funds and income for the mortgage multiple. Mark’s girlfriend makes a further great addition to the arrangement: all household bills and costs are divided between three people rather than two.
“We’re also extremely pleased that they’ve used our Shared Ownership Protection to protect themselves should anything go wrong. It’s by far and away the best protection for people looking to share owning a property with someone else and who want to protect their individual shares.”
