Shared Mortgages

[Uncle Timmy]

I found this article on ABCNews about shared mortgages. Some folks might find it interesting so I thought I would post it for everyone's review.......

Will this become more common here in the U.S.?



http://abcnews.go.com/Business/PersonalFinance/story?id=2507857&page=1

An excerpt:

England is one of the most expensive housing markets in the world. According to the British Land Registry, an average property costs ?199,000 (about $370,000), almost 10 times the median national income. Michaels did not have enough money to buy a place on his own. ..........

Now Michaels has started a Web site called Co-buy.co.uk to help people who want to own property but need the help of others. He founded the site four months ago, and he said that so far it has 500 registered users and received 60,000 hits in September. He has since launched versions of Co-buywithme.com in Canada, Australia and New Zealand.

Many Buyers Looking for Co-Investors


Like Michaels, more and more first-time U.K. buyers invest with friends to shoulder the financial burdern of owning property. According to HSBC, demand for shared mortgages in the United Kingdom rose by 50 percent this year.
For now, shared mortgages are a "niche product," but they have a lot of potential, according James Cartlidge, a mortgage manager with Sharetobuy.com, which offers financial counseling and services for people who want to buy shared homes.
"If people could buy on their own," said Cartlidge, "they would."

Co-Buyers in U.S. Look for an Investment, Not a Home


In the United States, major banks such as Citibank, allow several customers to borrow for a single property.

But buying a house with other friends is "not very common" this side of the Atlantic, said Walter Molony, spokesman for the National Association of Realtors, the main U.S. association for real estate companies.
Here, people who co-buy usually do so only for investment purposes and do not actually live in the properties.

 

[Mango]

The Banks here would be quite a bit more skeptical about unrelated parties purchasing a property together that was NOT a multifamily family residence.
The reason for that is a majority of mortgages are sold to Fannie Mae and Freddie Mac, both gov't agencies.
Depending on the agency, the guidelines are such that a co-signor (someone who is not living in the property) is debted separately with the housing payment as well, and thus many Bank underwriters would have a difficult time believing an unrelated party would really be living in the home if both applied together (not as a co-signor) but as joint applicants. Fannie Mae does debt both Borrowers together regardless of occupancy, but still it is not mainstream here on a primary residence to see multiple unrelated parties buying a home together.

I do see more ethnic groups purchase a home together, but it is all family.

I am not sure if CitiBank has a specific niche product since I do not do business with them.

Here in New York though, especially the Boroughs surrounding the city, there are quite a few multi family homes, but I rarely see unrelated parties purchase them together. We also have some Banks here that have some real laid back underwriting guidelines for areas that hugh minority populations, ie. the boroughs, and they allow for low down payments, higher debt to income ratios, some credit blebs. HSBC having the best program that even offers a significantly lower rate to these Borrowers. They would be more likely to make a loan under this program to unrelated parties since they portfolio the loan, then eventually sell to Freddie Mac.
Later they can show occupancy still, and that loan would be be saleable.

As far as I know, European Banks do not sell their mortgages to government agencies. I am not sure about England, but I have been to closings in Holland, and the way they underwrite loans would be considered illegal here. The rate is determined by age and health.
I have been to England and looked at real estate with my mother 14 years ago, but do not recall what the loan process was. It is probably more liberal than Holland since some US Banks got into that market because of the boom in real estate there. They were mainly sub-prime lenders. I was asked to go work there when they started the program, but was getting married.

 

[Uncle Timmy]

Very informative response, thanks Mango.

 

[spinDrAtl]

If one borrower can qualify for the loan but does not want to take on the entire burden, many times loans will be done under one borrower (perhaps the person with a high credit score), but with multiple parties on title. The parties can then arrange a partnership between themselves regarding obligations to each other, but of course the borrower on the loan is responsible to the lender.