With the average age of first-time buyers continuing to rise, the majority of youngsters find saving for a hefty deposit the biggest barrier to homeownership, with many opting to pool their resources with friends and family to help them onto the ladder.
Getting a mortgage and buying a first property has become increasingly difficult for young people. With rising property prices, lenders requiring bigger deposits and stricter affordability testing, it is no surprise that many millennials’ aspirations to buy a property has been deflated. However, a study by mortgage broker Freedom Mortgages has found that more millennials are clubbing together to get on the property ladder than ever before.
The study found that 41% of the non-homeowners surveyed said that saving for a deposit was their biggest barrier to buying a home, and 11% struggled to get a mortgage alone. But 2% of those interviewed had purchased a property with a friend or a relative to get on the property ladder.
Lance Beare, managing director of Freedom Mortgages, said:
“It helps take some of the burden off saving for a full 10% deposit and can increase the likelihood of being accepted for a mortgage.”
In response to the survey results, Freedom Mortgages is predicting that the proportion of people choosing this way to buy a home is set to increase.
Pros and cons of buying with a friend
The joint mortgage market is currently in “good shape” according to Brian Murphy, head of lending at the Mortgage Advice Bureau. “First-time buyer borrowing…appears to be on the increase after a strong January…with high LTV mortgages and other niche products such as…joint borrower…helping those who otherwise would need to find large deposits to get into their first property.”
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Obviously buying a property with a friend has some risks. Lenders will require all borrowers to be “jointly and severally liable” so that they can chase each borrower for the full amount owed. Plus taking out credit with someone means being financially linked, affecting each other’s credit scores.
However, in today’s marketplace, clubbing together may be the way forward for many young people looking to make their first investment in the property market. Co-buying means that young people can enter the market sooner, increase their buying power and reduce their financial commitments. What’s important is that both parties are clear from the outset about will happen should circumstances change.