Embarking on a joint property purchase

The current economic climate has influenced some homebuyers to consider who they purchase a property with. This article aims to provide you with the right essential information you need before embarking on a joint property purchase.

UNDERSTANDING YOUR FINANCIAL CAPABILITIES

Before starting your search for a new home, it’s crucial that you and your prospective co-purchaser have a transparent discussion about your financial capabilities. This includes the initial deposit, monthly mortgage payments and routine living expenses. When you pool resources together, often, you can afford a larger property in a more desirable location, splitting the mortgage and regular bills. It’s similar to sharing rent with your friends, but instead, your money is funnelled into your mortgage rather than your landlord’s pocket.

DISCUSSING YOUR FINANCIAL HISTORY

While discussing finances, it’s essential to touch upon your financial history, including any details that might negatively impact your chances of securing a mortgage. Although it can be an awkward conversation, it’s better to be aware of any potential issues upfront than to be blindsided by a mortgage rejection due to undisclosed credit score issues.

UNDERSTANDING JOINT MORTGAGES

If you’re considering borrowing more than your individual income would allow, a joint mortgage might be the right option. Some lenders permit up to four people on a mortgage agreement, typically considering the two highest incomes when determining the loanable amount. However, each person is equally responsible for the mortgage payments and fees, and if one party defaults, the lender can demand full payment from the other borrowers. Every borrower must meet the lender’s requirements and credit criteria before finalising an agreement.

CONSIDERING TENANTS IN COMMON

Buying as common tenants rather than joint tenants allows you to own your share of the property independently and proportionately. This arrangement enables you to sell your share and receive a return on your investment relative to your contribution. For example, if you contribute 40% towards the deposit and mortgage, you own 40% of the property’s value, irrespective of whether it appreciates or depreciates.

DRAFTING A LEGAL AGREEMENT

Regardless of your relationship with your co-purchaser – be it a sibling, friend or partner – it’s crucial to have a legal agreement prepared by a professional solicitor. This document protects you if one party decides to sell their share, relocates or faces financial difficulties. It may feel awkward now, but such agreements can prevent future disputes and protect your relationships.

CONSULTING A PROFESSIONAL MORTGAGE ADVISER

Consult a professional mortgage advisor before settling on a property or exploring mortgages. They can answer any questions, help determine your potential borrowing amount for a joint mortgage, and provide access to rates and offers not typically available on the high street. Consulting an adviser will ensure you find the right mortgage for your circumstances.

Don’t forget, our professional friendly advisors are on hand to support you and can help you explore all of your options.