Over the years, the inflation of property prices has far outweighed the increase of wages. In order to afford a property, a lot of people opt to buy with a friend or partner. This is because the combination of income allows for the lender to offer a higher mortgage amount.
You have someone to split your costs with, making it more affordable for both parties. However, this is a Specialist Mortgage and comes with some risk. In this article we will answer some questions we often receive and shed some clarity on buying a property with a friend or partner in Liverpool.
Some lenders will allow up to four people to co-own a property at one time. If one of the co-owners stop contributing to the monthly mortgage repayments, the other owners still have a right by law to stay in the property unless the court states otherwise. It’s with this in mind, that you need to be careful who you choose to buy a property with.
Any plans to increase the mortgage down the line, require consent from all involved. With this in mind, it is also important to discuss long term plans for owning your property.
Most couples who are married or in a civil partnership, opt for to take up a joint tenancy. If one of the applicants were to unfortunately die, the property would be passed along to the other owner. This is where mortgage life insurance comes in handy, as at that point the mortgage would be repaid.
If you are looking at remortgaging the property down the line, you would also need the consent of the other applicant to proceed.
Tenants in Common is sometimes chosen by the likes of relatives or friends buying a property together. This option allows you to own the property still jointly, but it doesn’t have to be equal shares. If one party is earning more money than the other, this works out well.
You can also act individually if you are a Tenant in Common, so you could realistically sell or give away your share, without the other person losing their stake in the property.
All parties involved are liable for the mortgage repayments, whether it’s a joint ownership or they have shares. If one member stops paying, the other(s) covers the payments to prevent any debt from building up.
Any arrears made on a mortgage may stop you from getting one in the future. Think of joint mortgages like this; you don’t each own 50%, you own 100% as a collective.
It can be really difficult to remove someone from a mortgage. Lenders need to know you can pay the mortgage yourself, without any assistance from the other party.
Nobody ever buys a property with a partner, with the intention of things ending. Taking out a mortgage could be the largest financial commitment you ever make and making any changes can be difficult. Therefore, it is important to assess your personal life before agreeing to something this big.
You may be able to demonstrate to a lender that since your ex moved out, you have been able to keep up your monthly repayments. However, this does not guarantee that a lender will agree to make it a sole name mortgage.
Lenders would much rather there be a second income in the event one person being unable to afford their half. The process of removing someone involves a brand new affordability assessment, much like they would when you first applied for a mortgage.
If your lender declines your request to do so, you should get in touch with your mortgage advisor in Liverpool to see if any other lenders would agree to let you transfer into your own name.
It may also be worth your time seeing if any family members can help you out. They can often gift a lump sum to reduce how much needs to be paid, or even put themselves on the mortgage to help out.
Even if you and your partner split up and you end up moving home in Liverpool, you are still responsible for repayments. Even if you agree with your ex that they will pay the full amount, should there ever be a time when your ex can’t pay, you are liable.
You need to keep an eye on your own credit report if you are sending them money each month. Whilst you may be holding up your end, they might not be and any defaults on their name also affects your credit score.
Being tied to an older mortgage also limits your ability to borrow for any new homes you are looking to buy, as the lender will take your current repayments into account, seeing them as existing credit commitments.
It is always a risk buying a home with someone else, so you always need to go in with open eyes. It is better to both agree on a plan in advance, to avoid difficulty if things ever do go wrong.