It’s not all about the money.
Property ownership is a serious life goal. From the security it provides, to the opportunity to escape having to deal with landlords, owning your own home has a lot of benefits. However, it’s also expensive – according to Nationwide the new average property price in the UK is now $276,215. That figure is a new record on the Nationwide index. Salaries, on the other hand, are not rising at the same rate – the average salary in the UK is $35,586. Despite these figures, there are still ways to buy a home when you’re short of cash.
Help to Buy
The government Help to Buy scheme is specifically designed for people who want to get onto the property ladder but don’t have a lot of cash with which to do it. While most mortgage lenders require a 10-20% deposit, if you’re using the Help to Buy scheme then you need just 5%. There are various different types of Help to Buy:
- The Help to Buy ISA – first time buyers who want to save can put the cash into a Help to Buy ISA and the government will top up whatever is saved by 25%.
- The Help to Buy Equity Loan – buyers receive a 20% equity loan from the government to add to a 5% deposit and a 75% mortgage.
- The Help to Buy mortgage guarantee – this was a scheme where the government provided a guarantee to lenders against which up to 95% mortgage could be loaned. This scheme is now closed.
Shared ownership
If you can’t afford a mortgage on 100% of the property you want to buy then you might be able to buy the proportion you can afford and pay rent on the rest. You can buy between 25% and 75% of the property value as long as you earn $104,000 or less outside London, or $112,000 or less inside London. This reduces mortgage commitments and means that even if you don’t have lots of cash in the bank you can still make a purchase. Just remember to factor in the additional rent to pay.
Buy with a friend or relative
It’s particularly tough for singletons to get on the property ladder given soaring house prices and the difficulty of saving for a deposit. That’s why many more people are now opting to buy with a friend or relative. You can share the cost of everything, from the deposit to the mortgage payments and the transaction costs, if you decide to co-own with a friend. Plus, you’ll both get that first foot on the property ladder. Just remember – for the sake of future friendship – to be crystal clear about who is entitled to what and how to bring the arrangement to an end. If buying with someone else is a step too far then consider asking your parents to help out by being a guarantor on a loan for you. Alternatively you may be able to use a secured loan to raise a deposit for a property.
Move back to your parents
It’s not an option for everyone but if your parents have a spare room then a year or so living rent free could be all you need to accumulate that precious deposit. Average rents are currently around $1,200 a month – put that aside for two years and you’ll have $28,800+ to start working out how to get on the property ladder with.
