Barclays Bank suggests buying in a group

08/12/2017
Barclays Bank suggests buying in a group

Being able to afford to buy a property in England is becoming harder with rising house prices and a shortage of properties to buy. The Government are doing what they can with Help to Buy and Shared Ownership, but neither are solutions for affording to the cost of living after you buy a property. 

Barclays Bank said in May 2014 Clubbing deposits and buying in a group - Up to four names are allowed on a property's deeds but many lenders limit you to two. However, buying in a group demands serious thought.

You should have a legal agreement drawn up by a professional before you buy that specifies each person's deposit contribution, monthly repayment and what should happen if any member wants to sell, leaves or dies.”
 

What's the benefit of clubbing together?

The key benefit is it will make buying a home affordable. Some homebuyers cannot afford to buy on their own, so clubbing together will enable them to buy. There is also the benefit of splitting the on-going living costs between the joint owners. 

1. Share a deposit and save £26,000 in mortgage interest

When you club together in a group and join deposits you can increase the deposit and either reduce the loan to value on the property or buy a more expensive property. In the article written by Barclays Bank, they suggest the sweet spot for the loan to value is 75% (this means that the bank lend you 75% and you invest 25%); however 25% of £200,000 is a lot of money. At 75% the bank will give you a preferential mortgage interest rate and you will be more likely to pass their risk process (if they had to repossess they could reclaim their 75% if they had to sell under value). 

The idea of grouping together could mean that 4 deposits of £12,500 can help get to the £50,000 needed and get the preferential mortgage interest rate. The principle is clear; more deposit means you pay less interest which means your mortgage repayments are lower. The saving you would make in getting a mortgage interest rate just 1% less is massive. Over 25 years on £200,000 at 3% you will pay £78,000 in interest, however if it was at 2% you will pay £52,000, £26,000 less. 

 

2. Share on-going living costs and save £11,333 per year

When you buy a property with a mortgage you will have to pay: 

Who to pay

Cost Per Year (Estimates)

1. Mortgage Repayment

£13,200

2. Council Tax

£1,600

2. Electricity

£400

3. Gas

£400

4. Water Rates

£200

5. Building/Contents Insurance

£500

6. TV Licence

£120

7. Telephone/Broadband

£100

8. Sky

£480

 

 

Estimated Total                    

£17,000

 

Use our Mortgage Affordability Calculator to see how much you could save.  

Although these numbers are estimates and they may go up or down depending on where you live and what mortgage you get; however it is clear that the annual living costs are expensive. 

If you bought a property in a group then the £17,000 would be shared equally between the joint owners. So, instead of £17,000, if you clubbed together with 3 people, your share would be £5,667 a saving of £11,333

What legal agreement do you need?

When buying with someone else, partner, family, friend, mortgage buddy, it is essential to have the arrangement documented to protect the joint owners. This is a legal document that is drafted by solicitors and should include a Cohabitation Agreement and a Deed of Trust

Want to club together, but don’t know anyone? Share a Mortgage can help

Share a Mortgage is a community of homebuyers looking to partner up with lime-minded people to buy a property together. Whether you buy as friends, family or with a Mortgage Buddy you met through Share a Mortgage, our Independent Mortgage Advisers will help find you the best Mortgage Interest Rates and then our friendly Conveyancing Solicitors will handle the legal work for you. 

You will also be offered Shared Ownership Protection that has a cohabitation agreement and Deed of Trust and also includes Inventory listing for personal possessions, dispute resolution procedure and Exit Help for when you want to leave or sell. 

Call us on 0207 112 5388 or email help@shareamortgage.com to find out more.

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