Getting on the property ladder | Money Talks

getting on the property ladder

In the current climate, getting on the property ladder seems like a faraway dream for many people who are yet to own a property.

According to the government’s Family Resources Survey, nearly three-quarters of 16-24-year-olds and almost half of 25 to 34-year-olds rent from a private landlord. The Zoopla report said that the typical tenant in the UK spends a third of their salary on rent each month.

The LGA has warned that many young people face renting properties into their retirement, as the cost of the private rental sector is preventing households from being able to save for a deposit.

The Guardian reported in 2019: “According to research commissioned by the National Housing Federation (which represents housing associations), 3.6 million people in England are living in an overcrowded home, 2.5 million are unable to afford their rent or mortgage, and another 2.5 million are in “hidden households” they can’t move out of – including house-shares, adults living with their parents, or people living with an ex. Rates of homeownership among the under-35s are at less than half the levels of 20 years ago.”

We know that when it comes to the world of mortgages and deposits, it can be overwhelming and confusing.

When it comes to researching how to buy your first home, look no further. We’ve scoured the internet for the best advice and options available in terms of getting your foot on the first rung.

The Deposit

The larger the deposit you can save, the easier it will be to get onto the property ladder. This also enables you to choose from a wider option of mortgages for you to select from.

Lately, there has been a lot of talk about 100% mortgages, which rely on your parents (or someone within your family) to agree to keep a percentage of the purchase price in a savings account.

Many people have resorted to moving back in with their parents or living in shared accommodation in order to save money for a deposit. Making small changes, such as making packed lunches or walking to work instead of driving can all help reduce your outgoings. 

Help to Buy Schemes

The help to buy is a government scheme to help people buy their first property. It is made up of an equity loan, a mortgage guarantee scheme and an individual savings account (ISA.)

The equity loan is only available for new-build properties and requires you to put down 5% of the cost of the property for a deposit. Once this is done, the government provides a loan of 20% of the property price, interest-free for the first five years. (Or 40% in London.) Once that time is up, you will be charged interest on the loan.

The Help to Buy scheme is for first-time buyers but it is also available for existing homeowners who are looking to move. You cannot use this scheme to buy a property and then rent it out.

Shared Ownership

Shared ownership has increased over the last year or so, which allows you to buy a share of a property from a council or housing association and pay rent on the remaining part. This way you have the option to buy a bigger share later on.

This is eligible for people whose household earns less than £80,000 a year. (Outside of London.) This enables you to put down a smaller deposit and makes a property more affordable for those who can’t yet buy a property outright.

Borrowing from the Bank of Mum and Dad

For those that are lucky enough to have parents who are willing to help get you on the property ladder, there are numerous ways, you can accept their support. Whether it is a loan agreement, for them to act as guarantors or taking a mortgage out jointly with you.

There are some mortgages that are designed with parental support in mind, meaning that there is extra security in place. Banks such as Barclays and Lloyds have recently offered options where a deposit from your parents or family members can help you get onto the property ladder, as an investment, with them earning interest on their loan.

Alternative ways to get on the property ladder

Building a property yourself is a unique way of getting onto the property ladder. It has been done, but it is not for the faint-hearted. Getting the right planning permission, staying in budget and to a timeline can be difficult. 

Buying the property that you rent is another way to get onto the property ladder. For those that have been long-term tenants and built up a relationship with their landlord/landlady, approaching them about purchasing the property could be a viable option. 

It is becoming increasingly common for the millennial generation to purchase a house as a group of friends rather than as solo or as a couple. Particularly popular in London, it could be a brilliant way to get your foot on the property ladder. Of course, it has its drawbacks and you’d need to be very sure of your friendships. 

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