Group Mortgages

On the increase these days are group mortgages, which basically are exactly what they sound like. For some people, buying with a partner is not on the cards – maybe they don't have a partner at all, or maybe they're not ready to move in together but want to get on the property ladder.

It's hard to buy a property on your own these days, with the level of affordable property for first time buyers dropping all the time, so people have started to get together to share the costs. Groups, usually friends or sometimes work colleagues, form an alliance and buy a place together.

This is becoming an increasingly popular way to buy property, with one high street lender reporting a 50% rise in applications for group mortgages this year. House prices are something like six times the average salary – who can afford to buy on their own any more? There are now a fair few mortgage lenders who now offer group mortgages, or mates' mortgages, as they're often called.

Who Would This Suit?

Basically anyone who can't afford to buy their first time property on their own – which these days is most of the population. It also suits those on a lower income as they find they may end up sharing a mortgage three or four ways instead of two, making the repayments much cheaper. Groups are a maximum of four people although three is better – any more and it can get complicated.

How Does it Work?

Getting a group mortgage is pretty much the same as a normal mortgage, but with the added responsibility of setting out the terms of the joint ownership. There are many problems that could arise when sharing with a group – what if someone wants out? Or what if someone else is made unemployed and can't pay their part of the mortgage.

For this reason it's a good idea to draw up what's known as a 'Declaration of Trust' document. This is a legal document which lays out the terms of the house ownership, for example, what shares each person has.

This could be affected by the amount of deposit each person pays, or the percentage of the mortgage repayments. If everyone is contributing equally then that's fine, but if not, those paying more may want to take a bigger slice of the ownership.

The document also covers ways for people to exit the agreement and move out, and what happens if someone can't pay their share. Get this all in writing and signed up so there's no question of any uncertainty down the line.

Once you're all in agreement on this, you find the property, make the offer, arrange the mortgage with a suitable lender and away you go! You will almost certainly need an IFA or mortgage broker for arranging group mortgages.

The Best Co-Owners?

Groups are normally – and advisably – friends or family. Going into an investment like this with perfect strangers isn't particularly advisable. Living with others is always a challenge, but in this case it's probably best to go with 'better the devil you know'.

Think about it carefully though – it's not like rented accommodation where you can leave after a few months if it doesn't work out.