Getting a mortgage with a friend: group mortgages

With the difficulties facing first time buyers in the UK, many are turning to taking out ‘group mortgages’ otherwise known as buying a property with a friend or friends.  This trend is particularly popular in London and in other areas of the UK where house prices are out of reach for the average first time buyer.  Legally, up to four people can be listed on property deeds and there are some lenders who will consider a mortgage for more than two applicants.  With several people pulling together for a healthy deposit, more mortgages become available and with better interest rates.

Although sharing the financial burden is an obvious way to alleviate the strain of meeting mortgage payments.  But however obvious it may be, it is not without its pitfalls.  Buying a home and taking a mortgage are serious financial commitments and not to be entered into without great consideration, particularly if you are going to be reliant upon someone else’s money to help pay your mortgage.

The first thing to consider is the suitability of the friend or friends with whom you wish to share.  Is living in close proximity with them going to cause any problems?  Remember, a mortgage is a commitment that you cannot just walk away from should house problems arise.  You could end up living with this person for several years, so it’s important that you think through the situation carefully.

One of the biggest concerns about taking group mortgages is regarding what to do should one of the house members’ circumstances change.  The fact that you are buying with friends and not blood relatives can weaken the situation because friends’ circumstances can quickly change: meeting a new partner, job relocation, unemployment.  In the event of one of the borrowers being able to meet mortgage payments, the other nominated mortgage borrowers are responsible to make the payments on their behalf.  Not only could you be left with a bigger financial responsibility than you envisaged, but your name would be tarred with a bad credit record if your friend fell into arrears even if you had made the payment on time – not an ideal situation by any means. 

There are options of course.  For example, in the event of the above happening you could swap the relevant friend’s name on the mortgage with another friend, or rent their room out – options which would have to be cleared first with your mortage lender.  It is important to ensure that legal documents are drawn up at the outset of the mortgage, detailing what would happen in the event of changes in circumstances.  Don’t be frightened to do this and to be firm about future possibilities.  It will prevent future arguments and safeguard everyone concerned.

Buying with a friend needn’t be a nightmare if you go into the venture sensibily and realistically.  When it comes to choosing the right first time buyer mortgage, we recommend speaking to a reputable no fee broker.  There is no need to pay a fee for expert mortgage advice, at a time when you will need all the money you can get.

Speak to an expert now about group mortgages

See also:
Free guide to first time buyer mortgages

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