Warning issued about mates mortgages

Moneymatchmaker.com warns of the possible credit problems that can be caused when taking out multi applicant mortgages.

Fears of an leap in impaired credit records as a result of mates mortgages has been raised after the British Bankers Association (BBA) and the Building Societies Association (BSA) revealed that around 60 banks and building societies are now prepared to lend to up to four applicants for a single property.
As a result of ever rising house prices, more first time buyers are looking to team up with friends to secure a first step onto the property ladder. Mark Leaper at Moneymatchmaker.co.uk recommends that potential buyers need to be confident that all parties have been upfront about their credit records as there are mortgages like a bad credit mortgage, which are available to suit most circumstances, but delays are caused if applications have to be resubmitted due to undisclosed credit problems.
Leaper said: “Unpolished credit records are common now days, but if the applicants don’t disclose everything at the outset, then delay can occur and delays may mean that the vendor becomes uneasy and may sell to another purchaser. Another concern has to be that the linking of applicants could mean that applicants with clean credit profiles are tarred with the same adverse credit footprint of the applicant with a poor credit rating. It’s crucial for all applicants to get their credit reports checked before proceeding and moneymatchmaker.com offers free credit reports as part of its no obligation mortgage quotes service”.

Beware - Any bad credit history on the part of one person will be instantly recorded against all parties to the mortgage as they become linked ‘by association.’ This could make it hard - even impossible - to secure credit in the future.

Leaper went on to point out that from the mortgage lender companies point of view, each party to the mortgage is responsible for the entire mortgage debt and monthly repayment. He said: "So whilst you may decide to share the mortgage repayments and each pay a proportion, in the event of one party missing a payment, the lender will look to all other parties to make up the shortfall. In other words, you are all jointly and severally liable for the total mortgage payment - and regardless of the fact that you have paid your share, if other parties have not, the lender will look to you to make up the deficit."
In the worst case scenario, if the mortgage goes into arrears as a result of one party missing their payments, then all parties to the mortgage agreement could find their credit file marked and their credit history adversely affected. Ironing out credit pitfalls in advance is also recommended.
Leaper said: "By buying with someone else, your credit files automatically become linked to each other by what’s known as financial association. So if one party has a poor credit history then all other linked parties could have their credit history adversely affected by association. It’s sensible therefore to provide one another with a copy of their credit file so that each can check the credit worthiness of the others. Moneymatchmaker.com provides free credit check searches as part of its enquiry service."

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