Move On Up ….With Griffiths Ings
By admin
Issued on behalf of Griffiths Ings
THE fundamental problem for first-time buyers is the price of property compared to the amount mortgage companies will lend to individuals to buy their first home. Unless the first-time buyer is on a very good salary then it’s unlikely they can afford even the cheapest properties. Mindful of this, more and more mortgage companies are looking favourably on mortgage applications from groups of up to four people getting together to buy their first home.
Getting together with friends and family is becoming increasingly popular as properties have become more expensive. Doing it this way, the mortgage companies will often take some or all of the individual incomes into account in calculating how much they will lend. And if the individuals have money they can put down as a deposit, the combined effect of their deposits could get them a better mortgage deal.
Common fears from people buying with their friends include:
- How do they protect their initial deposits?
- What happens if the friends fall out?
- What happens when one of them wants to move on?
We have found the most effective way of dealing with these concerns is with a Deed of Trust – a legally-binding document set up at the time the property is bought. It effectively ring fences and identifies who has paid what towards the initial deposit, providing clarity as to who has put what money into the purchase.
The Deed should also contain ways of dealing with disputes. If, for example, the friends cannot agree on the value of the property then a chartered surveyor is appointed under the Deed, with his decision binding on them all.
When one or more of the friends want to move on, the Deed should contain provisions for valuing the property and allowing the initial deposits to be repaid to the departing friend, together with any increase in the property’s value. The figure for this would be calculated in accordance with what was originally agreed in the Deed. It is usually on an equal basis, but could be based on the relative contributions each person has made to the mortgage. Usually, the remaining friends will by this time be able to afford to buy out the departing person, raising the funds by re-mortgaging the property.
