According to Santander, the number of property transactions from family members or friends is likely to increase by 25% per year, as first time buyers struggle to get onto the property ladder.
As more people struggle to raise a deposit to buy their own home, buying a house together with a friend or family member appears to be a good idea. However, there are risks attached, like one person wanting to sell their share of the property and get their money back, or falling out. In addition, there is also the risk of not being able to meet the repayments or house prices falling.
According to a study by Moneyfacts, the average price paid by a first time buyer is £161,912, with a deposit equivalent to 70% of their yearly salary. Mortgage brokers say that there are already more people buying properties together with a friend or family member. However, there is very little data available, as most lenders don’t differentiate between a couple and two friends buying a property. Most lenders will base the loan amount on the income of two people, although there are some lenders who will base the amount loaned on the incomes of up to four people.
Although this is an option for friends who want to get onto the property ladder, care should be taken to select the correct term for a fixed rate mortgage, as a long term fix won’t suit friends who have purchased in their twenties. Speaking to a CeMAP trained mortgage adviser will ensure you make the most suitable choices.