Buying with buddies
Property prices have rocketed out of reach for most young people. With first-time buyers forced to find more inventive ways of owning a property, we take a look at the growing trend of co-buying.
What is co-buying?
'Co-buying', or 'joint ownership', means clubbing together with family members, friends or even someone you've met online to share the deposit, mortgage payments and bills on a home. When you come to sell the property and move on, so long as prices have risen, you will get a share of the gains in proportion to what you've put into the kitty throughout. For those without a large pot of savings, it may be one of the only ways of getting on the first rung of the property ladder.
High times
Property prices have soared over the past two decades making it harder for young people to scrape together the deposit needed on even the cheapest home. Those without partners are especially unlucky - according to Moneyextra.com, if you're single and on an average £22,900 salary, buying a property is almost impossible. This is a fairly recent phenomenon - at the end of the 1980s, about 40% of young people aged 18-24 had bought their own place. Now less than 20% manage it.
Mates and mortgages
Co-buying is soaring in popularity, with dozens of mortgage lenders offering various 'mates' mortgage' deals allowing you to borrow with up to three friends.
A joint mortgage means you are both/all responsible for mortgage payments - if any of you is unable to pay for any reason, the payments still have to be made by the remaining joint owners (which is why mortgage protection is essential). A typical example of what a mortgage provider will lend is three times one person's salary plus one times each joint owner's salary. This formula varies and every group's situation is different - for example some joint owners may have money from parents.
Pros:
- Lowers the amount of deposit needed and your monthly costs;
- You can share the initial costs, including solicitor's fees;
- You are investing in the future rather than paying rent;
- You can may be able to shorten the term of the mortgage (time when you pay loan off), therefore saving interest;
- You share household bills, housework etc;
- May allow you to buy a more desirable property in a more attractive area;
- In many cases, sharing costs can work out cheaper than renting.
Cons:
- Mortgages are not to be taken lightly - you will have to trust your co-buyers completely, get on with them and be sure you have the same aims in mind;
- Experts warn groups of friends living together are 'unstable' households because they are more likely to experience conflicts of interest than couples;
- One or more of you may wish to sell before the others and you may have to make alternative arrangements (such as finding a tenant) to pay the mortgage;
- You need legal documents to protect your investment which means additional costs;
- You will need mortgage protection and life assurance;
- The process is bureaucratic - you will need accurate records to keep track of payments etc.
Come together
Suzee Taylor, 23, recently bought a two-bedroom maisonette on the outskirts of Brighton with her friends Kate and Jack for £165,000. "I've always wanted to buy in the area but as it's so expensive and I don't have a long-term boyfriend, I figured out it would take me about five years working my butt off to afford the deposit on a one-bed flat.
"Two good friends from uni, who are a couple, were struggling to find somewhere they could afford and the idea just clicked. We were scrupulous about talking everything through, from what kind of kitchen we wanted to how long we saw ourselves living as a threesome and got everything sorted after numerous meetings with our mortgage adviser and solicitor.
"The planning and buying process was stressful but I'm so excited we've done it. We're having a great time and we've invested in our own futures instead of lining a landlord's pocket."
Buddies online
If you're single and wanting to get onto the property ladder, but don't have a friend or family member to join forces with, there are several websites where you can meet your co-buying buddy online. The first of these was www.sharedspaces.co.uk set up in 2005 by Richard Cohn.
It offers advice on affordable housing and has a free co-buyer network where more than 2,500 members can check each other out as potential mortgage buddies. "I flat-shared for years before buying, and made some great friends along the way, and it was during this time I started to ask myself a question," says Richard. "If you can flat-share with complete strangers with great success, why can't people take it to the next level and buy together?"
Of course buying is a far bigger financial commitment than renting, but Richard says that with the correct legal framework (a 'deed of trust', costing roughly £200 to £500, to protect your rights); mortgage protection (to insure against any of you losing your jobs or becoming too ill to work); and time (as much time as you need to get to know your potential co-buyer well enough to call them a friend or a business partner), there's no reason why you can't have a successful co-buying experience.
By Elizabeth Nicholls
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