If you cannot afford a mortgage on your own, why not share it with your friends? Vanya Damyanova reports on an alternative way to fund a home purchase.
Having a home to call your own is the dream of most people in Britain. The latest First Time Buyer Opinion Barometer from Your Move and Reeds Rains shows that a staggering 91 per cent of renters want to buy their own property in the future.
Regardless of how much they want it though, many people cannot afford to buy. What is considered the biggest barrier to getting on the property ladder by over half of first-time buyers is the deposit.
You can rely on the Bank of Mum and Dad but now there is a way to get help from your friends as well. There is actually a social network for people looking to share their mortgage with a “buddy”. “It’s like Facebook for mortgages!” – this was my first reaction when I saw the website.
The unconventional but ingenious idea to create an online platform, allowing people to “team up, pool their resources and buy a property together using a one stop shop conveyancing service”, came to Andrew and Claudine Boast, founders of the Share A Mortgage service.
The process described on the website sounds easy and hassle-free: “Simply find a group of mortgage buddies, choose a property to buy and let us handle everything else for you.”
Wondering if it is really that easy to get on the property ladder I spoke to co-founder Andrew Boast who gave me a rundown of the ‘Share A Mortgage’ service.
Q How does networking on Share A Mortgage work exactly?
It is like any social network, however, our members all have one thing in common – they can’t afford to buy a property on their own. Finding a common interest in the world of social media can be difficult but with our members they can feel at home knowing they are on the same journey together.
This is why we share experiences of our mortgage buddies to inspire our members to let them know that buying a home is still achievable and they are on the path to accomplishing it.
Q What does somebody who wants to join Share A Mortgage need to know beforehand?
Buying a home and getting a mortgage is a serious commitment. It requires a lot of planning and can take years to finally achieve. The best advice for anyone who is starting out on their journey is:
- Start saving now – plan how much money you can afford to save each month and start saving immediately. Even a small amount per month can make a difference. £100 a month will be £4,800 in four years, but £250 is £12,000. Saving money may mean making a lifestyle change now to make yourself better off in the future so be realistic when budgeting and use our affordability checking tool at shareamortgage.com.
- Check your credit report – making sure your credit report is in order is paramount to getting a mortgage. Missed credit card payments, payday loan applications and overdraft penalties can all affect how your credit rating will look to a mortgage lender. You can find out how best to keep a good credit rating on our website.
Q Why would you recommend sharing a mortgage? What are the benefits?
Owning your own home gives you a great feeling of independence and for many is an essential rite of passage: it’s when many feel they can get married and/or have children and can generally ‘get on’ with their lives.
- You are paying off a mortgage which means that eventually the property should become yours: it will be your equity. As a renter all you are doing is giving money to a landlord that you’ll never see again – it is just dead money being poured away.
- A house purchase might end up becoming your retirement savings – something you can downsize and use the equity to keep you from relying on a less than favourable state pension.
You may make a capital gain if property prices rise and you sell.
Sharing a mortgage with someone other than a life partner isn’t a decision you make thinking you are going to live with them forever. It should be viewed more as an opportunity to get onto the housing ladder with someone who is in ‘the same boat as you’ who equally wants to stop wasting money on rent and start benefiting from being a homeowner.
Q Tell us about a successful case of “teaming up” via Share A Mortgage?
Joanna and Mark are a prime example of how Share a Mortgage can help first-time buyers achieve ownership. They were friends already but hadn’t even thought about buying a home together.
When Joanna heard about Share a Mortgage she told all of her friends and two came forward to see if they could buy with each other. One of her friends wasn’t able to afford the place they wanted in London, but her other friend, Mark, was. Now they are about to complete on their first home in London all from starting their journey through Share a Mortgage.
Where Joanna and Mark helped each other was that Joanna had a large deposit but an average salary. However, Mark had an average deposit but a good salary. Combined, they were able to use the Share a Mortgage concept to get on the housing ladder.
Joanna commented: “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.
“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.”
Q Do many customers using your system choose to share a mortgage with people they did not previously know?
Most of our mortgage sharers know each other whether as a friend, flat mate or family member, however, they hadn’t thought of buying with each other until they heard about Share a Mortgage
Most were thinking they’d have to stay paying rent for years to come until they found their life partner to buy with. Now they see the opportunity of buying with someone like them and getting on the housing ladder.
We see this evolving as society becomes more and more mobile. Twenty years ago, finding a life partner through the internet would have been laughed at. In fact, online dating used to be thought of as very taboo. Fast forward to today and 50 per cent of people in the UK use the internet to find a partner.
We see our social network of home buyers evolving into a hub where people can choose who they want to live with based on their lifestyle, location, affordability or even religious or personal beliefs that align with their own.
The sharing economy is the pooling of resources and the sustainable sharing of an opportunity that would otherwise be unavailable. This is at the heart of our thinking and has lead the way for others in this arena to equally flourish. Who would have thought a stranger would rent their home whilst they weren’t living in it? Air BNB now provide this option. Who could have imagined sharing their car journeys for money? Now Blah Blah cars is fulfilling this need. The sharing economy presents opportunities for people to benefit from mutual interests.
Share a Mortgage is leading this forward thinking approach to sharing the cost of buying a home in a housing market where one person can simply not afford to buy on their own!
Q How big, in your opinion, is the proportion of Share A Mortgage customers who find a “mortgage match” via the system?
Less than 10 per cent of our clients buy their property on their own. It is simply becoming an unachievable goal for people to purchase independently. The rest are turning to friends, partners, flat mates and even their family to find a way to buy a home together.
Q What is the bigger problem for aspiring buyers – the lack of housing stock or the tough affordability rules?
The affordability rules are a good measure by the banks to make sure first-time buyers know the reality of the costs of buying a home, which in my opinion also support sustainability. At Share a Mortgage, we champion affordable home buying by promoting sharing the costs with someone else.
What is needed is a focused approach to building the required number of properties in the areas that need it the most, with a curb on the amount of these that are sold to overseas investors (dare I say, even to UK buy-to-let landlords). Sadly, over 73 per cent of central London new builds have been sold overseas leaving the needy London market battling, turning up to viewings with another 20 hopeful buyers trying to get their foot on the London housing ladder.
Sadly, this undersupply of new properties is forcing prices out of the reach of first-time buyers. Nonetheless, for those combining their resources and sharing a mortgage, their increased buying power is making buying in London and the rest of the UK achievable again.
Q How do you see the future of the UK mortgage market? Will renting overtake homeownership?
Homeownership is on the decline to 65 per cent (down from 71 per cent in 2003) and for nine million 18 to 34 year olds they are left with no option but to rent or live with their parents. The prime reasons for this are soaring house prices, fuelled by huge demand and a lack of properties being built, as well as the low growth seen in the average earner’s wage.
Renting is certainly on the increase as less people are able to afford to buy. For some, renting costs more than if individuals were paying money directly into their own mortgage.
What we’d like to see is the best use of the housing stock available to first-time buyers for a change in the law which recognises the individual property rights of people choosing to live together and share mortgages who may not be married or even cohabiting.
Any increase in the housing supply would certainly help – there is a need for 250,000 homes to be built each year, but the current figure is barely half of this. The challenge here is that, unless the government intervenes, the drive to build more properties and force down prices doesn’t support the profitability achieved by developers. As you can imagine, developers would much prefer keeping the demand high along with the prices being paid.
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Andrew Boast’s top tips for finding the right “mortgage buddy”
– Sharing a mortgage isn’t for life
It’s best to look at sharing a mortgage in the same way as a business relationship. You decide how the business is
going to run and agree a clear ‘exit’ point when you are going to sell.
So when you are choosing a mortgage buddy, don’t think, ‘can I live with them forever?’ Think, ‘can I live with you for a few years while I get myself on the property ladder?’
– Stay secure and in control
People have been safely meeting new people on dating websites for years; in fact they estimate 50 per cent of new relationships will be found this way within 20 years. However, be sure never to give out any personal information to anyone straight away.
– Do your checks
Sharing a mortgage with someone else, whether a partner or friend, is a serious commitment so you need to know who you are going to buy with. It is in both of your interests to make sure you know as much as you can about the person you are sharing with.
– Shared Ownership Protection
Buying a home requires a lot of thought and having a legal document to protect co-owners is incredibly important. As with anything, you never need something until you really need it.
– Be flexible
You may not be able to afford the palace you initially dreamed of, or live on the exact road you wanted so it’s always a good idea to be open to new ideas and different options. Make sure you take the time to discuss what you want, as well as listening to those of your mortgage buddy.
– Stay on top of your finances
From the outset you both need to be clear on what you can afford, not only as a deposit but in terms of the ongoing maintenance of the property. Make sure you both have your finances in order and that you can afford the bills.
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