Guide for Home Ownership
Entering the world of home ownership can be incredibly overwhelming, particularly when confronted with the seemingly infinite number of options. It’s important to know what types of mortgages are currently available on the market so that you can make the right choice for you.
At PuMP our friendly team of experts know how important it is to choose the right mortgage, especially for first-time buyers. We take the time to really get to know you and understand exactly what you need from your mortgage.
If you are considering buying a property with a partner, friend, or family member, then a joint mortgage allows you to own the property in equal parts. This arrangement means that you agree to share the financial responsibility. With this shared responsibility comes shared liability meaning that if one co-owner fails to pay their share of the mortgage repayment, you’re still responsible for them.
Another option to consider would be a guarantor mortgage. This is where a parent or another family member agrees to cover any mortgage payments that you might find yourself struggling to repay. As a guarantor, that family member usually offers their own assets as security against the loan.
Whilst the majority of guarantor mortgages run smoothly, it is important to remember that financial arrangements involving large sums of money have the potential to put a strain on family relationships. Your guarantor may be putting ownership of their own home at risk should you encounter any major repayment issues.
Joint Borrower Sole Proprietor Mortgages:
Joint borrower sole proprietor mortgages have become a great mortgage option in recent years. This is where you take a mortgage out with parents or another family member, but only you own the property. You all have a shared responsibility for paying the mortgage, but as your earn potential increases the more your lender will expect you (the sole proprietor) to take on the repayments.
These mortgages are flexible, and you can reduce the amount your family needs to pay over time. Like the guarantor mortgage, it is important to consider the strain costly mortgage payments may put on your relationships. Should there be any issues, it may become complicated and expensive to remove their names from the mortgage as ‘joint borrowers’ later down the line.
Shared Ownership Mortgage:
Increasingly popular amongst first-time buyers, shared ownership mortgages offer you the option of only taking out a mortgage for a specific percentage of the property. The rest is placed in the ownership of the government or named landlord. You only make repayments on the share of the property that you officially own. Thus, the initial deposit required is smaller than if you were buying the entire property outright.
Note that you still have to pay rent to the ‘other party’ on the proportion of the property that you do not own. This is a factor that needs to be taken into account when deciding what percentage of your future home you’re prepared to pay outright.
For mortgages we are paid a fee, usually £299 and by commission from the lender.