Share a mortgage with 3 other people? I don't think so!

Yup, they're at it again. First it was Britannia and now it HSBC.

 

Both lenders are targetting young aspiring homeowners who are finding it tough to get onto the property ladder. They will allow up to 4 individuals to be on the same mortgage, providing they're all living at the mortgaged address.

 

Let's look at this rationally:

 

PRO - You can club together to raise the deposit & pay the mortgage every month.

 

CON - When I was sharing digs, my (conincidentally) 3 flat-mates and I couldn't seem to pay into the tea, bread & milk fund regularly. Would we each have paid our share of the mortgage every month, not likely.

 

PRO - You already spend money on rent every month. With a Share to Buy mortgage, you are likely to pay less each month AND be investing in your own property.

 

CON - Investment ambitions and exit-plans are different for everybody. With a Share to Buy mortgage, you've got 4 people all with different agendas.

For example, Dave wants to do the place up, sell in 18 months and use the funds gained to buy another property and do it all again. Sue just wants to pay less rent and not have to ask a landlord when she repaints her bedroom in 'tapioca sunset' from Droollux. Jeff & Jenny are starting a family and want little Hubert to go to school in this particular catchment area.

Okay, so these ideals aren't neccesarily incompatible, but every time one of them wants to move or sell, the others have to find a way to but that person out, which means finding the money for their share AND paying the lenders and legal fees that go with the process.

 

PRO - Shared costs & shared savings.

 

CON - If one of your 'mates' does a runner, you're stuck trying to pay his/her share of the mortgage. If that's going to happen, you might as well not have bought with the person in the first place.

 

All in all, I'm certain you can tell I think it's a dreadful idea. The only people for whom I think this might work (and this is a bit tenuous) is when it's family. For example, if you, your parents and your brother want to buy a house together for the long term. This is because you've got a history of living together anyway, and you can probably figure out a strategy for making it work if one or more of you do want out. However, as this is a first time buyer mortgage, my fictional family would be unlikely to be eligible (the parents would probably have had a mortgage before).

 

The scale of the problems involved this sort of arrangement is one of the reasons we set up the Joint Equity Scheme. With JointEquity, it's just you (either alone or with your partner) and your Investor. We've got a legal agreement to make sure you're both protected, and it's you, the Owner, who says when you sell-up or buy your Investor out. The Investor does have an option to sell after 5 years, but we can normally replace them with another Investor if you want to stay in the property for longer.

 

Whilst Joint Equity is an option, I wouldn't touch Share to Buy with a barge-pole.

 

Take care,

 

Tam

 

Tam @ Joint Equity Owner Team

Joint Equity Blogger

www.jointequity.co.uk