Financing a Shared Home

How to finance a shared home

Knowing your budget from the offset is vital and will save you time in the long run. You will need to speak to a mortgage broker or lender to discover how much you can afford to borrow so that you don't waste time looking at properties that fall outside your price range.

Once you have discovered what you can borrow, if you are registered on SmartSharedHomes you can let everyone know by updating your profile and you can start to search for others with similar funds available.

Deposits

You also need to be clear what deposit (if any) you have available when commencing your search, and show this in your SmartSharedHomes profile.

If you don't have a deposit at all it doesn't mean that you can't buy. It just means that will need to secure a 100%+ mortgage.

There are a number of mortgage lenders that currently offer 100%+ mortgages, although it can prove one of the most expensive ways of buying a property.

Different mortgages available for 'shared buyers'

Many mortgage lenders now offer multiple borrower or shared ownership mortgages, but the deals on offer vary considerably.

You will need to speak with your mortgage broker to establish how much you can borrow with your shared-buyer/s, and which options are best for your combined circumstances.

Before commencing a serious property search you need to establish exactly what your combined budget is - mortgage and deposit, and then you can ask your mortgage broker for an 'offer in principle'. This is free, and it should only take a few minutes for your mortgage broker to get this from the lender you have chosen. This means that on principle, the lender has agreed to offer you a mortgage on the basic information you have provided. This is not a guaranteed mortgage offer but it will put you in a better position when putting in an offer on a property and may save you time further down the line.

There are two basic types of mortgage:

Repayment - by paying off the capital borrowed and the associated interest, you will own the property outright by then end of the mortgage term (typically 25 years)
Interest only - you will only be paying off the interest on your mortgage loan (this is worked out on the principle that the property you bought will increase in value to such an extent that when you come to sell it, the amount you borrowed to buy it would only be a small percentage of its eventual value).

Rates:

Variable Rate Mortgage: A variable rate mortgage tracks the Bank of England's base rate and as a result will fluctuate to reflect this. As a result of the uncertainty that comes with this type of mortgage, they can often be offered at lower rates than fixed rate mortgages.
Fixed Rate Mortgage: Fixed rate mortgages are where the mortgage lender offers you a fixed rate that will remain for an agreed period of time (typically one - three years). Due to the reduced risk these rates can sometimes be higher.