How to get on the property ladder #1 Co-buying

In the face of expensive prices and stretched finances, first-time buyers are becoming more creative when it comes to getting their foot on the property ladder. One trend - co-buying - allows groups of up to four friends to share the cost of buying a home together with a so-called ‘mates' mortgage'.

It's an appealing possibility for wannabe homeowners who can't afford to buy on their own. To go it alone, first-time buyers need an average income of around £35,000 and a mortgage of around £115,000 to get on the ladder. This means borrowing over three times their income - a record high, according to the Council of Mortgage Lenders.

Buying with other people and applying for a shared mortgage may be the cheaper option, but what are the pros and cons? Make sure you do your homework before taking the plunge:

1.     Friends and flatmates?

Think long and hard about who you make an investment with. Being the best of friends might not guarantee a successful house share. Ideally, buy with someone you've already lived with, so you know what to expect. If you don't want to mix money and your mates but need a fellow buyer, try a website like SharedSpaces. Post your details and find other co-buyers looking for someone to invest with in your area.

According to Richard Cohn, SharedSpace's founding director: "What started out as an idea has grown into a movement. The co-buyer revolution is here. Thousands across the nation have decided not to simply sit back and accept that they cannot afford to buy what they want, they've decided to do something about it. By teaming up with others you can double or even triple your budget, halve all the costs and own years sooner than you could on your own."

2.     The mortgage market

Be prepared to shop around to get the best deal. Most mortgage lenders will let you buy with up to three other people, but they base their calculations on different factors. Some only take into account the two highest incomes, while others use affordability rather than income multiples, taking into account outgoings as well as income. There are also a growing number of specialist mates' mortgages, allowing you to buy with up to four people and arranging the extra legal paperwork for you.

3.     Check your credit

It only takes one poor credit rating among a group of potential buyers to cause problems when securing a mortgage, so make sure your finances are in order before applying. Check your financial status with a credit report - this allows you to view what lenders will see about you when you apply for a mortgage, and gives you the opportunity to correct mistakes.

4.     Stay covered

Each member of the group needs to be confident they can afford the financial commitment involved in buying a property. A joint mortgage means joint responsibility - or footing the bill if one of the group isn't able to keep up with their mortgage payments. Co-owners should cover themselves in the event they're not able to pay.

5.     The right paperwork

Before you take the plunge, draw up legal contracts defining who owns what share of the property, and setting out the deposit contribution and monthly payments for each group member. Most shared owners sign up as tenants in common, where two or more people have rights of possession over a property, but the ownership is specifically apportioned. A conveyancer will be able to arrange these legal documents on your behalf.

6.     The long term picture

What do you want from your first investment - to live there long-term, make a profit, go solo at the first possible moment? Be clear what each member of your group wants from the property. Devise a contingency plan to cover all eventualities, including when someone wants to move out, so that everyone can plan for a change in circumstances rather than getting a nasty surprise.

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