Millennials are uniting to invest in property
Saving for a deposit is the biggest barrier to buying a home according to 41% of non-homeowners. A study by Freedom Mortgages has found that as a result of this, an increasing number of millennials are choosing to buy a property with a friend or relative.
This is backed up by research by M&S Bank that revealed a fifth (20%) of people aged 18-35 believe they’ll never be in a position to own their own home unless they take out a joint mortgage – more than half (59%) of 18-35 year-olds said they’ve managed to save less than £1,000 and home ownership is out of their reach unless they pool resources with other people.
With the average age of first-time buyers continuing to rise, the study found 60% of people in this age range said they’d consider taking out a mortgage as a group to enable them to buy a property, compared to just one in four (26%) of people aged over 36.
“For many, homeownership appears possible only through sacrificing certain aspects of their current lifestyle – be that moving to a different area, moving to a smaller property than they’re renting, or seeing their disposable income take a significant hit. But our research has shown that millennials are keen for an alternative option – and joint home ownership is one of them – from housemate to mortgage-mate is a natural progression which can enable more people to achieve the otherwise unattainable – their dream of property ownership,” said Paul Stokes, head of products at M&S Bank.
The downside of sharing a property
Putting an agreement in place at the outset is vital as you need to know where you stand if the other party should want to sell up. A deed of trust can be used to document how much each person has contributed to the property deposit, and detail what should happen if one investor wants to sell their share of the property at a later date.
It’s also worth bearing in mind that everyone on the mortgage is jointly liable for the monthly repayments, therefore, if one person doesn’t keep up with their share of payments, the others will need to cover their costs. Lenders generally require all borrowers to be jointly and severally liable – meaning they can pursue each borrower for the full amount owed.
Advantages of joint ownership
One of the main advantages of buying a home with others is that your combined savings provide you with a much larger deposit, thus giving you access to a wider choice of mortgages at more competitive rates.
Plus, your combined incomes will allow you to borrow a higher amount than you could afford alone. However, you will need to work out how you’re going to legally manage the property together.
In summary, joining forces is an obvious way for many people to make their first investment in property. It can enable you to enter the market sooner and boost your buying power but cut your financial burden.
The crucial factor is to be clear at the beginning how the property will be managed if one or more persons decide to move on.
Would you like to learn more about property investment?
At PMA, we run a Mentoring Programme to show you how to invest in property as well as a range of courses aimed at beginners and seasoned property investors.