| Introduction | | | | Mortgage experts see this type of lending as higher |
| With the dramatic and continued increase in property | | | | risk than standard loans. For example, relationships |
| prices, more and more people are clubbing together to | | | | between people taking group mortgages can be more |
| take out shared group mortgages. This article | | | | remote than a standard mortgage, which would |
| discusses the different types of Group Home Loans | | | | typically be taken out by couples or spouses. |
| on offer by the different mortgage companies and | | | | Therefore lenders sometimes ensure that if one |
| also looks at some of the problems of group | | | | person on the mortgage were to move on, the |
| ownership. | | | | remaining borrowers could still afford to take on the |
| Shared Home Loans | | | | remaining stake and service the higher loan |
| With the rise in house prices and people struggling to | | | | repayments. |
| individually get on the property ladder more and more | | | | Lenders are therefore usually more conservative |
| people are willing to shelve their differences and take | | | | when they come to assessing the lending criteria. |
| the risk of sharing their living space and taking a | | | | Some score each borrower individually according to |
| shared home loan. Lenders report that around 2-3% of | | | | their salary and outgoings and then aggregate it. |
| all mortgages are now being taken out under shared | | | | Others will lend up to three times each of up to four |
| ownership and predict the numbers to rise fast. One | | | | salaries, whereas others will lend twice the two highest |
| mortgage lender reported a 50% rise in shared home | | | | salaries in the group and one times the income of the |
| loans over the last twelve months and others have | | | | remainder of the group. |
| reported very strong growth. | | | | One of the key things about taking on a shared home |
| The main rises in this area are coming in the South | | | | loan is that each individual in the group can be held fully |
| East and in major cities where first time buyers are | | | | responsible by the lender for the entire loan if their |
| being priced out of the market. But by taking a group | | | | fellow borrowers do not keep up with repayments. |
| mortgage, potential homeowners can typically borrow | | | | As there is a plethora of detail to consider, it is highly |
| more than they could by going it alone or with a | | | | recommended that people looking at a shared loan |
| partner and can therefore secured a property that | | | | should draw up a legal agreement before taking on the |
| would otherwise have been out of their reach. | | | | mortgage. Issues range from who is paying what |
| Group mortgages are not a new concept or | | | | share of the deposit, which is responsible for what |
| standalone separate products to mainstream | | | | proportion of the repayments and what will happen |
| mortgages. Typically mortgage lenders offer their | | | | when somebody wants to sell their share. Even the |
| standard loan deals and rates to groups of borrowers. | | | | things that may seem mundane like shares of |
| So the loan packages include the standard fixed rate, | | | | maintenance costs or who gets the biggest bedroom |
| variable rate and tracker mortgages. But the amount | | | | are equally as important. |
| borrowers will be able to borrow varies from lender to | | | | All this information can draft into a document known |
| lender as different loan providers adopt different | | | | as a "declaration of trust". These types of contracts |
| lending criteria. With the growing trend in this type of | | | | can be bought off the shelf or are available from a |
| mortgage one change in recent times is that more | | | | number of websites, but it is wise to go to an |
| lenders are willing to consider four individual salaries, | | | | experienced property lawyer, as these types of |
| whereas before they would only take two. | | | | agreement can be fairly complex. |
| Shared mortgages are typically being taken out by | | | | Conclusion |
| people in the twenty to thirty five age groups and are | | | | For some people wanting to get on the property |
| normally by groups of graduates or young | | | | ladder, shared ownership and loan payment may be |
| professionals who may already have rented a | | | | the only option. With the wide variety of different |
| property together. Most people consider it as a last | | | | lending criteria it is advisable to spend a considerable |
| option when they have failed to raise a deposit | | | | amount of time looking at all the different parameters |
| themselves from parental help or from savings. | | | | and variables offered for shared home loans. It is also |
| However the changes in lifestyles like delaying | | | | necessary to spend an equal amount of time drawing |
| marriage or starting a family is also contributing to the | | | | up the legal side of the agreement. |
| growth in shared home loans. | | | | |