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Going Dutch on buying property

Going Dutch on buying property

Couples wanting to maximise their affordability eligibility by buying a property together is nothing new, while in the past few years the industry has also seen an increasing number of millennials reaching out for financial help from parents and grandparents to get on the housing ladder.

A newer trend, if statistics are to be believed, is that young people are now more open than ever to purchasing a property with their friends.

A study by M&S Bank, published last month, found 62 per cent of 18 to 30 year olds would consider a group mortgage. In the survey, two-thirds of respondents said that saving for a deposit is the main thing holding them back from buying a house.

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Sue Fox, chief executive of M&S Bank, said: “Lots of young people feel disheartened and frustrated when they look at property prices. Saving for a deposit often feels impossible and most millennials aren’t in the position to go it alone, but might not have found their ideal partner, be ready to move in together, or may not be looking for love. This doesn’t mean homeownership is unattainable.

Key points

  • Many millennials are resorting to group mortgages to get onto the property ladder
  • Often it is relatives wanting to buy properties together
  • It is better to have a tenants in common agreement

“We recognise that many millennials have financial goals, including homeownership, and that they should be able to do this on their schedule. Their financial future shouldn’t be dependent on the trajectory of their love life, which equally might not be something they want, or at least not in the short term.

“This is why joint mortgages can be a great option for those who otherwise wouldn’t be able to get onto the property ladder.”

Necessity might push millennials to set up home with each other, but Jane King, mortgage adviser at London-based Ash-Ridge, said she is not currently seeing an increase in enquiries for these types of mortgages.

Rather, what she has seen a rise in enquiries for are joint borrower sole-proprietor mortgages.

These types of mortgages enable borrowers struggling with the affordability criteria, because of low income, to get help from a family member typically, who will add their name to the mortgage.

Therefore, their income will be added and used to assess the affordability assessment.

The advantage of this type of mortgage is that the additional person’s name will be on the mortgage, but not on the title deed, so they are excluded from having to pay the 3 per cent stamp duty for a second property.

Instead of friends wanting to buy properties together, Ms King is getting enquiries from relatives who want to buy a property together, such as brothers and sisters and cousins.

Although relationships between family members are seen as a safer bet than buying with friends, Ms King said the risks are still very similar.

She added: “With family relations there are pros and cons to buying with them. It takes specific financial planning to make it work. When it works it is fine, but it is not as easy as it is made out to be.”

As with friends, relatives can also fall out with each other. With friends, the risks are even greater.