That's what friends are for

LONDONERS are increasingly indulging in threesomes and even foursomes - not because they want to recreate the Bloomsbury Set, but simply because they can't afford to own a home in the capital otherwise.

The latest borrowing trend among single Londoners frustrated by high property prices should not be entered into lightly, as they can be more risky and complicated than buying in the conventional couple set-up.

The latest figures from Halifax show that the average price of a London property is nudging pounds 180,000, compared with the UK average of pounds 96,149. This pounds 83,409 gap is more than double that at the height of the late Eighties boom.

Putting faith in your friends and applying for a group mortgage could be one solution, though you would be wise to prepare, both legally and emotionally, well before the start of the rows over who gets the biggest bedroom.

According to London First, which lobbies for improved prosperity in London, it is not just nurses and teachers who can no longer afford to buy on their own.

It reckons that if you earn less than pounds 28,000 a year, it is impossible to buy anywhere in London.

Combining three or four incomes makes for a stronger mortgage application.

It can also widen your choice to include pricier, more central or more spacious properties.

Karen Garner, of independent financial adviser Charcol, says: "We are seeing more Londoners getting round high prices by clubbing together, especially if they want to buy more than a shed."

The other advantage is that pooling three or four deposits can increase the choice of mortgages, with more competitive deals available the less you have to borrow.

There is nothing to stop up to four friends buying a property together - the maximum number of people legally allowed on a property deed is four. However, only a few lenders will lend the incomes of more than two people.

Couples applying for a mortgage can expect to be offered about 2.75 times their combined incomes, while group mortgage applications can expect to be offered up to four times the highest income plus one times each of the other incomes.

Skipton Building Society (www.

skipton.co.uk) is one of the lenders willing to be more generous. It is prepared to lend twice the income of up to four borrowers.

Spokesman Mark Smitheringale says: "Combining incomes of three or four people is a sensible and practical thing for Londoners to do.

The only issue is that the relationships between these people aren't normally permanent."

It's the lack of relation by blood or marriage that can lead to problems in the future for group borrowers. One of your party may want to set up home with a partner, or may have to relocate for business purposes.

This could happen at the least convenient time - and when it does, everybody on the mortgage deed is jointly liable to make up the balance of the payments. In the event of arrears, everyone on the mortgage will be tainted with a bad payment record, even those who have paid up on time.

This is why it is important to know and trust your co-owning mates very well. If someone leaves, the remaining borrowers have the option of shouldering the extra repayments themselves, but if the other borrowers don't have the spare cash you can replace the borrower on the deed or rent out a room, both of which need to be cleared with the lender.

It is a good idea to safeguard your investment in the property by drawing up a legal agreement before completion. Charcol (www.

charcolonline.co.uk) recommends that this agreement should take into account how much each party is contributing, both in terms of the deposit and the monthly mortgage repayments. Do not allow emotions to get in the way and do not let embarrassment stop you from taking pre-emptive steps.

These should ensure that there are no rows in the future over what each party is entitled to if it comes to buying a co-owner out or selling the property.

Charcol also suggests that properlydrafted tenancy agreements can prevent squabbles. For example, a joint tenancy agreement can stipulate that if one co-owner of the property dies, the remaining co- owners automatically receive his or her share of the property.

While group-buying may seem like one of the easiest and fun ways to escape throwing money away on rent, the reality requires serious forward planning.

The experience may end up showing you who your friends really are.

Know the risks

1. Rent together for six months first - it is far easier to walk away from a tenancy agreement than from a jointly owned property.

2. Everyone on the mortgage deed is jointly liable to pay the whole mortgage. If one of the co-owners can't meet their obligations, the others will have to pay.

3. Consider what would happen if one of the co-owners couldn't work due to illness, was made unemployed, wanted to move out of the property or died.

Think about getting mortgage payment protection insurance, income protection or critical illness cover.

4. Remember that any tenancy agreements designed to deal with potential problems need to be put in place before the mortgage has completed.

Seeking legal advice early is highly recommended.

Copyright 2002
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