Benefits of a Group Mortgage

Group Mortgages

Whilst not all high street banks will consider Group mortgages, there are some mortgage lenders willing to consider them for groups of between two and four people. A specialist mortgage broker can offer advice on criteria and rates.

Group Mortgage Benefits

Get a Free Quote Benefits of a Group Mortgage
One of the clear advantages of this type of mortgage and purchasing process is that it enables people to purchase properties that they would not otherwise be able to afford on their own. Of course, this might require the purchase of a bigger property which would reduce the benefits of a group mortgage.

For example, a one bed flat in a suburb of London would be available for 250,000, whereas a two bedroom flat would cost approximately 340,000. Therefore, the saving by purchasing together would not be 125,000 but instead would be 80,000 (i.e. 340,000 divided by 2 minus 250,000). In fact, in terms of price per square foot per person, the individual buyer might not be much better off, as they would have to share communal areas such as kitchen, living room and bathrooms.

The real benefit from this arrangement is that, whilst the individual may have less living space in a jointly owned two bedroom flat than they would if they were living on their own in a one bedroom flat, they are now on the property ladder. Saving up for a deposit is becoming increasingly difficult as rising housing costs push rents upwards. Therefore, individuals are finding themselves in a position of renting and trying to save a deposit; meanwhile, house prices are continuing to rise and the amount of deposit that needs to be saved is escalating.

Gain From Property Market Increase
By getting on the property ladder, even with a part share, it negates this problem and means that the individual is gaining from any property market increase. Taking the same property as we previously considered at 340,000: if property prices rise by approximately 10% in the year, at the end of the year the property will be worth 374,000. At that point, if they sold the property, each individual would walk away with a profit of 17,000. Of course, this relies on property prices rising, which is by no means guaranteed in the current financial climate.

Looking deeper into these figures, assuming that the two individuals put in a 10% deposit, each individual would have put in a deposit of 17,000 and taken a mortgage of 153,000. At the end of the first year, if the property were sold for 374,000, the share would be 187,000. After paying back the mortgage of 153,000, this would result in cash remaining of 34,000. This would amply allow the individual to go on and put down a deposit on their own one bedroom property.

Another advantage is that by going for a larger mortgage, even as a collective group, it often opens up other options in terms of mortgages available. Essentially, the larger the amount being borrowed, the more options are generally available, in terms of rates and lenders.

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