Our friend, David Lauder, a mortgage adviser with the ESPC, recently wrote an article published in the ESPC Paper (30th November 2017) all about buying a property with a friend.
Can friends get a joint mortgage?
As David points out in his article, a question that he is being asked more frequently is whether it is possible to get a joint mortgage with a friend. And the answer is yes. Basically, applying for a mortgage with a friend is similar to a normal application process and very similar to an unmarried couple buying together.
So why are friends considering buying a property together?
Where I have seen this happen most often is the situation where friends are thinking of starting a property investment business together and so it is a business partnership.
But with property prices in Edinburgh rising steeply in 2017 and there being no signs of that changing in 2018 perhaps we shall see more friends or indeed brothers and sisters in 2018 deciding that the best way to get their first step on the property ladder is to combine their resources and buy a property together. And that can make a lot of sense.
What is the mortgage application process?
As David explains in his article, your application (and responsibility for the mortgage) will be joint and will be assessed in the normal ways factoring in your joint affordability. This will include your income less your monthly commitments (such as regular loan repayments), car finance and credit card balances. The lender may also assess bank statements to see evidence of how you conduct your finances on a daily basis. You will also be asked to pass the lender’s credit score, which will be assessed on your combined scores and conduct to confirm eligibility.
The Mortgage Application process will be different if you are thinking of buying an investment property as this will involve a Buy to Let Mortgage.
Bank of Mum and Dad
You will probably still need to have a sizeable deposit and so the Bank of Mum and Dad might also play a part.
Whether you are contributing to the deposit equally or in unequal shares and with or without the assistance of funds from the Bank of Mum & Dad, we can offer you advice on how best to take ownership of the property you wish to buy. And also whether it would be a good idea to also have an Agreement put in place to agree the terms of who gets what in the event of a sale.
For information about the sort of Agreement I have in mind, why not read our article Tips for Unmarried Couples Buying Property. Friends buying together is not really that dissimilar to an unmarried couple buying together.
Agreement in Principle
One of the first steps is to get an Agreement in Principle. This will give you an idea of what size of mortgage you could be offered. You can get one online from most lenders’ websites or alternatively you can get your mortgage adviser, such as David Lauder at the ESPC, to get you one.
I do recommend this as an important first step. You will need to set your budget and it is important to know the current Edinburgh property market as you will almost inevitably have to offer over valuation to secure your property. For more information on budgeting, see our First Time Buyers Budgeting Guide.
Help to Buy ISA
I also recommend that any First Time Buyer considers opening a Help to Buy ISA account. This is a great way to get additional money towards your deposit. Basically, the government gives you an extra 25% on your savings. For more information about Help to Buy ISAs take a look at our two part guide of all you need to know – Part 1 and Part 2.
Why not contact David about a mortgage?
David Lauder is a mortgage adviser at the ESPC in George St Edinburgh. His email address is [email protected] and he can be contacted on 07810 522 422.