More is being done than ever to encourage first time buyers to enter the market, despite the fact that more than ten million people are currently renting in the UK.
That represents roughly a sixth of the population, and tends to suggest that accessing the property ladder is far from easy.
But in truth, there are plenty of ways to get started, although all of them need careful consideration before you choose the right option for you.
Help to Buy
The Help to Buy scheme provides people with the option to purchase a new-build or existing property with as little as a 5% deposit.
The homes in question cannot be worth more than £600,000, but that is the only major limiting factor with a Help to Buy deal.
Under the Help to Buy equity loan (new builds only), the government will lend up to 20% of the total cost of the property, meaning only a 5% cash deposit and a 75% mortgage are required.
In addition, homeowners won’t be charged loan fees on the 20% for the first five years that they own the property.
Under the Help to Buy mortgage guarantee (on existing properties), the government offers lenders the option to purchase a guarantee on mortgage loans.
This gives banks the ability to offer 95% LTV mortgages, meaning would-be buyers take out a 95% mortgage and put down a 5% deposit.
The scheme began in March 2013 and is designed to offer first time buyers access to the market – although this does mean that you won’t be able to own another property if considering this option.
Just owning part of a property is a great way to find a house without the need to save for a hefty deposit and secure a large mortgage.
Shared ownership is where you’ll purchase part of a property – usually in the region of 25% to 75% – and then pay rent to the Housing Association/developer on the part you don’t own.
You are limited to certain locations with schemes like this and priority may also be given to key workers or those already living/working in the area around the development.
It may also take you some time to purchase the remaining equity on the property, and own it outright.
You will also have to factor in what could be a significant service charge on top of your rent and mortgage costs.
These schemes represent an accessible and affordable way to get on to the property ladder and are well worth some consideration.
Joining with friends
More heads are usually better than one, and when looking to get on the housing market this analogy certainly applies.
Sharing the financial commitment means that sealing deals with lenders will often be more straightforward while it’s likely that a smaller deposit will also be required.
This does require a great deal of trust in whoever you choose to go into partnership with and represents a huge financial commitment.
Defining responsibility on the deeds is also important –holding a mortgage in joint names means equal responsibility, for example.
Decisions will also be needed on how bills and fees will be split between parties, but for those looking to get started for less, sharing is definitely an option.
If someone else is willing to shoulder the risks then opting for a guarantor mortgage could be an option.
Some first time buyer mortgages will allow another individual to act as a guarantor, basically meaning that they’ll cover any money owed in any instances when repayments are overdue.
The guarantor will often need some sort of collateral – often their own property – before they will be considered for such an arrangement.
With the extra guarantees that such a deal usually offers, it can mean that a mortgage can be offered for a smaller amount, giving you access to the property market for less.
However, the guarantor must be aware of the risks involved, as unexpected circumstances could quickly see them needing to stump up cash.
Consider a small property to start with
When looking to get started in might be better to look for a property that is smaller than what you actually need.
Size isn’t necessarily everything in the early days, so spending less on a smaller property could be a good way to start saving up funds for a deposit on another property.
This isn’t to say that the small house will be your living space forever but it might help to get you on the market in the first instance.
That way, larger investments can be considered further down the line when finances or the property market might not be such an issue.