Group Mortgages – Frequently Asked Questions
Q: How many people can you have in a group mortgage?
A: The maximum number allowed by law is four.
Q: I have a bad credit history. Will this affect my chances of getting a group mortgage?
A: Probably not any more than with regular mortgages. If your situation is now stable, and you have an income, you should have a reasonable chance.
Q: What happens if one person leaves?
A: All members of the group are collectively liable for that member’s payments, and can be pursued by the lender if the payments fall into arrears. If you can’t buy that member’s share from them, then you may have to sell the property.
It is highly-advisable to have a Declaration of Trust for Group Mortgages agreement in place to plan for these eventualities.
Q: Do the group each have to have equal shares?
A: No. Each member can have any share – but make sure shares are agreed and defined beforehand in aDeclaration of Trust document.
Q: Is each member’s income counted towards the amount that can be borrowed?
A: Almost all schemes now include every member’s income. However, the highest one or two incomes are often given a greater weight than the lower incomes – each bank and building society has its own method of calculating the amount that can be borrowed.
Q: Does everyone on the mortgage have to live in the property?
A: Not necessarily. Some lenders offer schemes designed for families to buy properties based on (for example) the parents’ and one child’s income, for the child to live in.
Q: How is the profit divided when the property is sold?
A: This should be agreed and defined in your special Declaration of Trust for Group Mortgages document beforehand – any arrangement is possible, although the decision can be quite complex.
One person might have contributed most of the deposit, but only paid 10% of the mortgage each month. Another may have paid 50% of the monthly payments, but have contributed no deposit. Work it out before you sign!