Joint Mortgage with friend options

cresswell80

Hi all,

now that i can see light at the end of the tunnel with regards to my credit card defaults, i can finally afford to buy a house...

a friend of mine also wants to buy a house, so our plan was to buy together for a couple of years then move on when the time is right.

As we are looking at properties up to £150k, we appear to have a couple of options:

1. My friend can obtain c£75k from his parents who are happy to give him this - all he has to do is pay them back £300 per month (the opportunity cost of the interest perhaps?)... I would then get a mortgage for the other £75k.

2. Get a joint mortgage. The only issue I see with this, is that my credit rating is obviously impaired due to previous defaults on 2 credit cards. How would this affect a joint mortgage (i assume that he would have to pay the higher interest rate that i would be penalised with, even though he has no adverse credit history?)

Any advice on the above would be appreciated.

Some facts that may be useful:

My salary - £28k
Friends salary - £18k

[Deleted User]

I would not have thought that the 2 CC defaults would adversely affect your mortgage application. However, it would appear that you may be overlooking that when you buy a house, your lender would expect you to put some deposit. Do you have at least 10K between you and your friend? Also, you will need to find some money for legal and admin expenses such as solicitors, valuation fee and I'm not sure about stamp duty. I'm not clear if the limit is 120K or 150k.

There is very little to choose between the 2 methods. But bear in mind that building societies may be reluctant to give you a mortgage in your sole name. Your friend may want to register a charge on the property deeds if his parents advance him the 75k. Building societies will not agree to such a charge- that's like having 2 mortgagors on the same property. So I think your only option would be for the 2 of you to take out a joint mortgage under a tenants in common agreement.

Also, think before taking out any long term fixed mortgages, in case your circumstance change and you'll be stuck with paying high redemption fees.

cresswell80

thanks lindabea... some answers to your questions:

should we go with option 2, the mortgage would have to be 100%... the way that option 1 would work (and i may be slightly naive here), was that the 75k from his parents would be like a deposit, with the other 75k funded through a mortgage... i'm not sure what a charge on the property deeds is....

cresswell80

also, i was wondering if anyone has any experience with the share to buy scheme here ... this could offer a convenient solution if viable... (not sure about the implications of the bad credit rating though...)

Ian_W

I would fix up to see a mortgage broker, creswell, as the issues aren't simple. Try https://www.unbiased.co.uk or better still a recommendation from family or friends.

First there is your credit history, probably not fatal, maybe not even seriously damaging but a broker is going to have a better idea which lenders are going to be sympathetic and which are less likely to be.

Then there is the problem with the 1st idea, which is that 2 of you will own the prop but only 1 will be on the mortgage. Lenders won't do that. If you were to default on the mortgage the lender wouldn't be able to repo the prop because of the joint owner. If you both own the property you must both be on the mortgage. If its plan 2 then you'll need advice about 100% mortgages, which are to be avoided if at all poss because they're more expensive as the lender is taking a greater risk.

I also agree with linda that you need to think about the other costs of buying. Arr fees, survey, legal and stamp duty all add up, on top of that add moving costs and any furnishings needed. I'd say you'll need at least £5K, probably more.

If you can't afford those sort of costs and ideally a 5 or 10% deposit then I'd seriously consider whether the time is right. Having gone through one lot of pain with debt, you don't want to stretch yourself too far and end up at square one.

HTH & BoL.

cresswell80

Ian_W wrote:

I would fix up to see a mortgage broker, creswell, as the issues aren't simple. Try https://www.unbiased.co.uk or better still a recommendation from family or friends.

First there is your credit history, probably not fatal, maybe not even seriously damaging but a broker is going to have a better idea which lenders are going to be sympathetic and which are less likely to be.

Then there is the problem with the 1st idea, which is that 2 of you will own the prop but only 1 will be on the mortgage. Lenders won't do that. If you were to default on the mortgage the lender wouldn't be able to repo the prop because of the joint owner. If you both own the property you must both be on the mortgage. If its plan 2 then you'll need advice about 100% mortgages, which are to be avoided if at all poss because they're more expensive as the lender is taking a greater risk.

I also agree with linda that you need to think about the other costs of buying. Arr fees, survey, legal and stamp duty all add up, on top of that add moving costs and any furnishings needed. I'd say you'll need at least £5K, probably more.

If you can't afford those sort of costs and ideally a 5 or 10% deposit then I'd seriously consider whether the time is right. Having gone through one lot of pain with debt, you don't want to stretch yourself too far and end up at square one.

HTH & BoL.

thanks for this Ian... we're not looking to buy until towards the end of the year, we're just getting things sorted mentally, so meeting the costs of buying will be ok..

the credit card debt was from when i was a student - i'm lucky that 2 years after graduating, i'm on a salary sufficient enought to pay it off. I currently have c£1k going out per month on repayments and rent...substitute that for an £800 shared mortgage and the difference speaks for itself...

next step contact a broker i think...