Monday, 20 September 2021

Ever thought about buying with a friend?

Ever thought about buying with a friend?

UK property prices are now more than 50 per cent higher than in 2005, when the average home sold for £150,000.

Today’s average is £228,000 — £6,000 higher than in May last year.

With such impressive capital gains to be had, it’s no wonder people are looking for new ways to get on the ladder — especially as wages have failed to keep pace with the rise in prices.

Weekly earnings average £518 today, up from £381 in 2005 — an increase of 35 per cent compared to the 50 per cent that house prices have increased by — with the rise being steeper in London and the South East.

The problems is such that more and more people are finding home ownership an unattainable dream.

In the case of young people, the Resolution Foundation reported earlier this year that up to a third of millennials face living in rented accommodation for their entire lives.

Currently, around four in 10 30-year-olds live in private rented accommodation — double the rate of the previous generation and four times that of baby boomers at the same age. Given the constraints people face, more and more are now choosing to join forces with friends or family to get on the property ladder.

But given that friendships and family relationships can fracture, it is worth bearing the following points in mind:

1. Speak to a solicitor about putting in place a declaration of trust to secure each party’s share of the property. This can help in cases where one person puts in a bigger share of the deposit — sometimes thanks to a gift from their parents, who may also want to seek legal advice.

2. Check your credit ratings — again with an eye to what might happen if circumstances change. If one party is unable to keep up with mortgage repayments, both parties credit profiles could be affected.

3. Consider taking out a shorter term fixed rate mortgage. Most high street lenders will accept friends as mortgage applicants, so many of the best rates will still be available — but a shorter term mortgage would help avoid the problem of having to pay an early redemption penalty should things change. Alternatively, look for mortgage products without such penalties.

Property

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