Tips, Guidelines and Information for Group Mortgages

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 Success

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Group mortgages really are an ideal way to get on the property ladder and to begin to build equity from the rising house prices’ situation. However, it is also very easy to see how these arrangements can potentially go sour, so safeguards should be taken to ensure that the major pitfalls are avoided.

Firstly, try renting as a group, before you buy. The purchasing process from start to finish will normally take at least six months, so why not locate a temporary rental property from which to conduct your search. This will serve several purposes; it will allow you to go through the house choosing process as a group. If you are unable to locate a property that you all agree on, this is indicative that purchasing a property together may not be such a good idea! Also, it will allow you all to see if you can live in harmony together. Finally, it will make the administration of the purchasing process a lot easier if you are all under one roof and able to sign documents at the same time.

Having a legally binding agreement, as well as the mortgage deed is imperative. A deed of trust is vital to ensure that the property passes in the correct way if something happens to one of the other owners. Similarly, it is important to make sure that you, as a group, hold the property in the correct way. There are two options: joint tenancy or a tenancy in common. With a joint tenancy, which is the most common option for husband and wife couples, the group own the whole. This means that, if one person dies, the property then passes to the remaining individual, outside of any will that may exist. For an unrelated group, a tenancy in common may be more suitable as this allows each individual to own a defined share of the whole. For example, if there are four owners all putting in equally, this will amount to owning 25% each. If one of the members of the group dies, their share of 25% will pass in line with the rest of their estate and not to the three survivors.

As well as the legal issues, it is also important to deal with practical matters such as what will happen if one person wants or needs to move on Will there be any house rules such as how many visitors will be allowed; are there any agreements as to how often maintenance tasks such as cleaning the gutters will be organised. How often will windows be replaced, are there any renovations or improvements that you will undertake and, if so, will there be a cap on any of the costs that are ploughed into these renovations

Group Mortgage Summary
Entering into a group mortgage is one of the most popular ways to allow groups of friends to get onto the property ladder. By pooling deposits and pooling the repayments, you will be able to afford properties that would otherwise be beyond your reach.

However, there are some very serious considerations that have to be taken on board, before entering into a formal legal agreement. Make sure that everyone’s expectations and abilities to make repayments are the same and that there is a plan to deal with unexpected events.

Always obtain legal advice and make sure that you cover all of the bases and possible events. In doing so, you could be one step closer to getting on that elusive property ladder!

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