Joint borrowing
More than half of millennials – those aged between 18 and 35 - are considering buying a home with friends or family to achieve their aim of getting on the property ladder. Steep house prices in many areas of the country combined with large deposit requirements and tighter lending criteria mean that, for this age group in particular, home ownership often appears out of reach unless they can pool resources with other people.
A fifth (20%) of people aged 18-35 do not believe they will ever be in a position to own their own home, according to new research from M&S Bank, with a joint mortgage being their only hope of buying a home.
The main barrier to purchasing a property is saving for a deposit, with more than half (59%) of 18-35 year olds having managed to save less than £1,000. The bank found that 60% of people in this age range said they would consider taking out a mortgage as a group so that they could buy a property, compared to just one in four (26%) of people aged over 36.“Many young people are trapped in Generation Rent because house prices seem increasingly out of reach,” said Paul Stokes, head of products at M&S Bank.
“For many, home ownership appears possible only through sacrificing certain aspects of their current lifestyle – be that moving to a different area, moving to a smaller property than they’re renting, or seeing their disposable income take a significant hit.“But our research has shown that millennials are keen for an alternative option – and joint home ownership is one of them – from housemate to mortgage-mate is a natural progression which can enable more people to achieve the otherwise unattainable – their dream of property ownership."
Benefits and drawbacks of joint ownership
There are several advantages of buying a home with one or more friends or family, and there are a number of lenders who will offer mortgages to groups of up to four people.
Combining your savings means that you will have a larger deposit to put down, which will give you access to a wider range of mortgages at better rates.
If a group of you are buying together, lenders will usually take the two highest incomes into consideration when assessing you for a mortgage, which may mean you are able to borrow more than if you were buying on your own.
This could give you access to bigger and better properties than you’d be able to afford alone.
However, it’s important to consider how you’ll manage things if you or the people you bought with want to move out or sell up in the future, as this can cause difficulties if one of you wants to stay put.
Some joint owners opt to set up a ‘deed of trust’ showing how much each person has contributed to the property deposit, and outlining what will happen if one of you wants to sell your share of the property at a later date.
Remember too that everyone on the mortgage will be jointly liable for the monthly mortgage payments, so if one or more people doesn’t keep up with their share of the repayments, you’ll need to cover their costs.
