Group Mortgages UK

UK group mortgages are not a new concept, but they are becoming newly popular with recent buyers, especially those looking to purchase their first properties. A group mortgage is a mortgage that is held by two to four people, using the combined incomes to decide how much can be lent. The people who own the mortgage also jointly own the property they are purchasing.

The Need for Group Mortgages

UK group mortgages are needed because of the ever-increasing prices of homes in the country. Homes are averaging around ?180,000 right now in the UK, and that is almost six times the average annual income. When lenders will only lend three to four times the individual’s income, this makes it nearly impossible for some buyers to own a home. Many first time buyers who do not have a lot of money to put as a deposit on a property are turning to group mortgages to get their first home.

How Group Mortgages Work

UK group mortgages work like traditional mortgages. The main difference is that there are more than just two people signing the mortgage agreement. The maximum number of people who can sign group mortgages is four, and the minimum is two. So the first step in applying for a group mortgage is choosing your group.

After choosing a property and setting a sale price, those who are looking to benefit from group mortgages can use an independent mortgage broker to find a lender that offers this mortgage structure. As part of the mortgage agreement, the potential owners will draw up and sign a Declaration of Trust. All of the people in the group will provide proof of income, and that combined income will be used to determine if the group members can afford the loan. The credit scores of all group members will also be considered.

Benefits of Group Mortgages

Group mortgages carry many benefits over renting, which is often the only other option for those in the market for this mortgage product. Of course, in a rental agreement you do not get any return for your money. In contrast, UK group mortgages allow the homeowners to begin building equity in their home, which can later be used to move up the property ladder. Also, as property prices rise, the share in the home that you own will increase in value as well. Thus, you can potentially sell the home, gather the profits, and use them to move into a home of your own with a traditional mortgage. With group mortgages, not being able to afford a property on your own is no longer a problem.