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Friendly way to buy a home

By Exeter Express and Echo  |  Posted: June 07, 2012

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IT'S almost impossible to open a newspaper today and avoid a story about the problems facing first-time buyers or those who want to move to a new home.

The issues start with cost: last month, the average asking price of a UK home increased by £911 to £228,298, according to the latest figures from FindaProperty.com.

But it's not just the price of a new home that's making it more difficult for buyers. The other problem is the struggle to secure a mortgage.

The double dip recession and the worsening eurozone crisis has led the Bank of England to warn that homeowners could face higher mortgage repayments as lenders raise interest rates to recoup costs.

A repayment hike can be devastating for many homeowners on standard variable rate mortgages, who could end up paying thousands of pounds a year extra. Lenders are also passing their extra costs on to many fixed rate deals.

The pressure on lenders to raise lending interest rates also makes the situation worse for so-called mortgage prisoners – those who can't afford to move to a new home because the change in the mortgage market means they would not be able to negotiate a new mortgage. The unfortunate effect of this could be a slowdown in transactions as lenders become even more picky about who they are willing to offer mortgages to.

But there are options for wannabe home owners – so long as they're willing to think creatively.

For instance, new research by FindaProperty.com reveals that buying a property with friends could be the answer to many first-time buyer woes.

It turns out that three friends clubbing together to buy a three bedroom home is the most cost effective route on to the property ladder for those who are willing to share.

Not only is the average mortgage repayment for a three-bedroom house in the UK, spread equally between three occupiers, £334 per person, but the monthly repayments of this size account for an affordable 19 per cent of the average net wage across the UK.

Buying a property with friends could also lead to a larger deposit – something mortgage lenders particularly value at the moment. It could also lower the associated costs of moving – so council tax and utility bills will be lower.

Of course, there are some practical concerns to keep in mind if you take this route. Be sure to speak to a solicitor and have a contract drawn up about what should happen if one friend wants to leave the arrangement.

But as a leg up into the world of property equity, sharing with friends could be a sensible first-step on the road to full home ownership.

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