Caring, sharing way to give cash a lift...
From having a nanny to buying a home or even going on holiday, why it can pay to pool resources
IT MIGHT seem like something from the free-loving 1960s, but ‘sharing’ can make a lot of sense when it comes to your finances. From sharing a mortgage, car journeys and even childcare, pulling together to increase purchasing power or reduce costs has never been more popular.
HOUSE BUYING
RISING house prices are forcing buyers to be more imaginative about how they get on to the property ladder. This can sometimes mean buying with a parent or sibling, or even purchasing with friends.
Sharing a mortgage with friends is no longer viewed as unusual with many mainstream banks and building societies willing to lend.
Although some will accept up to four unrelated people on a mortgage, most will only use the highest two incomes when determining how much they are prepared to lend. Hinckley & Rugby Building Society and Halifax are more flexible.
Jordan Ball, a 25-year-old programme manager for an aeroplane parts manufacturer, has just celebrated one year in the first home he bought with two friends in Luton, Bedfordshire.
By clubbing together and sharing mortgage repayments with Lloyd King and Connor Green, both also 25, Jordan has been able to take that often elusive first step on to the property ladder.
Jordan says: ‘We are all lucky to be in stable, well-paid jobs.’ Connor is a quality inspector for the same company Jordan works for while Lloyd works in computing. Jordan adds: ‘We were renting together and when a house came on to the market in the same street we looked at the financial numbers to see if we could get a mortgage between us.’
The three friends secured a £234,000 mortgage with Halifax, paying a six per cent deposit – almost £5,000 each – on the £249,000 asking price. They took a two-year fixed rate at 3.59 per cent. At about £1,183 a month between them the mortgage repayments come in at about the same as they were paying collectively in rent.
‘There is no way I could have bought on my own,’ says Jordan. ‘This way I am not wasting money in rent. Hopefully, if property prices rise I will build up some equity. In time, when we are ready to move on, we shall be in a stronger financial position. We all plan to stay in the house for at least five years.’
While buying with friends can make financial sense, borrowers must tread with caution. Consider taking legal advice to fully understand the implications of buying together.
Lenders will view all borrowers as jointly and severally liable for the mortgage. This means they can chase any – or all – parties for payments if mortgage arrears accumulate. Liability is not limited to the share that each borrower pays towards the mortgage each month.
Also, borrowers need to think about what they would do if one of them wants to sell before the others. David Hollingworth, mortgage expert at London and Country Mortgages in Bath, Somerset, says: ‘If someone wants out in a house bought jointly, the others may be able to buy out the share, but if they cannot they would have to find another friend to buy into the property and take on the mortgage – or else sell. Talking about these scenarios at the outset should help avoid problems or conflict at a later stage.’
HOLIDAY HOUSE SWAP
HOMEOWNERS can also share their home – and save money at the same time – through house swapping.
Thousands of homeowners swap properties every year in ‘home-from-home’ holidays. Not only do you get a change of scene and try out living somewhere new, but as this is a home swap you will have built-in house-sitters looking after your property while you are away.
A number of websites, including Love Home Swap and Home For Exchange, enable homeowners to find suitable swaps beyond just family and friends – both at home and overseas.
This can work out far cheaper than booking holiday accommodation.
Remember to inform your home insurer as you may need to discuss getting extra cover for the period of the swap.
CAR JOURNEYS
CAR-SHARING has been thrust into the spotlight by comedian Peter Kay’s successful TV series Car Share.
But lift-sharing or car pools have been around for decades, helping commuters save on petrol costs and enjoy a more sociable trip to work.
The internet has enabled many more people to find suitable car shares, using them for lifts to work and also longer trips to see family and friends.
Websites including Liftshare. BlaBlaCar and GoCarShare – and their mobile phone apps – match up drivers with those looking for a lift.
There is usually no charge to register on these websites. Passengers pay a contribution to the driver to cover some of the fuel costs. Some look for regular journeys, such as the weekly commute to work, while others may need a one-off journey.
Drummond Gilbert is chief executive of GoCarShare. He set up the website to change the way people travel and use their cars – and it now has around 60,000 users.
Passengers pay a fee to the driver while the website takes a 15 per cent commission (from the driver). Some journeys advertised on the website include Manchester to Salisbury for £15 and Bournemouth to Stansted for £12.
Gilbert says: ‘Drivers set their own prices although we have recommended fees based on mileage.’
Archie Turner, 43, lives in rural Dorset. When he was stuck in traffic on his daily commute and saw a billboard advert for Liftshare which pointed out that 90 per cent of journeys are completed without a passenger, it struck a chord.
Archie went to the website, which is not-for-profit and applies no charge for users and takes no commission from drivers. He entered the details of his car journey and to his surprise fond a companion – Ewan Steele, 39, who, like Archie, lives in Bridport and travels an 80-mile round trip to work in Poole.
‘We emailed and then met up in a local pub – to check we would get along,’ says Archie, a purchasing manager for an aerospace company. ‘We started sharing the car journey four days a week – and that was two years ago. It has halved the cost of our commute, it is better for the environment – and we have also become good friends.’
Archie estimates he saves around £30 a week in petrol costs. He pays half the costs of Ewan’s fuel.
CHILDCARE
THE high price of childcare can be a struggle for many households. Often it is a bigger expense than the rent or mortgage. For some, it is economical
to halve the burden by sharing a nanny with another family. Known as a ‘nanny share’, the arrangement means you and another family share the costs and responsibilities of employing a nanny.
As well as sharing payment of the nanny’s wages, it also means you share the tax burden. As employers, the families are responsible for paying tax and employer’s National Insurance on behalf of the nanny.
Nanny shares can work in different ways to suit the families. The nanny may look after your child and another family’s child at the same time, for example, working out of one or either of your homes. This will usually be the cheapest option as you can split the hourly pay rate. Expect to pay from around £10 to £15 gross per hour for a live-out nanny. In other cases the nanny may work for you for part of the week and the other family on other days.
Once your nanny is earning more than the annual tax-free income tax allowance of £11,500 (this is the nanny’s total earnings – not just what you pay the nanny) you must pay tax and National Insurance – although in a nanny share arrangement the tax liability is split with the other family, significantly reducing costs.
Specialist websites such as Nannytax, Nanny Paye and Paye For Nannies can help with the tax and administration of employing a nanny.
They can send payslips on your behalf, make payments to Revenue & Customs, sort out National Insurance contributions and set up a pension plan for your nanny (under auto-enrolment rules).
Costs and services vary. An annual subscription to Nannytax is £276, £179.99 with Nanny Paye and £138 with Paye For Nannies.
Graham Newton, chief executive at Nanny Paye, says: ‘There are many benefits to a nanny share – not just the reduced tax. Your child will have the benefit of interaction with other children, you can share some of the administrative burdens and costs such as registration with Ofsted. If your nanny drives you can share petrol costs.’
Check out playgroups and parent and baby activities for share requests. Post your details and requirements in local cafes or libraries to say you are looking for a similar family for a nanny share.