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Theres safety – and bulk deals – in numbers!
In these tough times when prices for everything seem to be continually rising, a joint approach can boost spending power.
That’s the broad philosophy underlying the new social phenomenon called ‘crowdsourcing’. We saw the concept in action following the Deepwater Horizon oil spill in the Gulf of Mexico, when BP called on Joe Public for ideas to stem the flow of oil after its in-house solutions failed. So far BP's corporate Mayday has elicited more than 20,000 suggestions!
Now this collaborative approach has been applied to the free market, as people form community-based co-operatives to club together and get the best deals on everything from food and fuel to investments and house buying.
Certainly, with the average house prices now six times the average annual income, and millions of buyers shut out of the property market, joining with friends or family to buy a property has become increasingly common. It can give those fed up with renting an all important first foot up onto the property ladder. In our experience, a number of building societies and banks – notably NatWest, Santander and HSBC - will lend mortgages to groups of friends, usually four unrelated people. The mortgage is usually based on the two largest salaries, but three or four people are all named on the application, they will be jointly and severally liable for repayments. This means that if one or more are unable to make their contribution, the other applicants will still be expected to meet the full monthly payment.
It is a good idea for friends to draw up contacts to avoid disputes at a later stage. For example, one person may wish to move out or sell, so it is advisable to know in advance what will happen, should circumstances change.
Paul Nevin – Principal and Business Development at Census Financial Planning