Saving up a deposit for a house can seem like an impossible task and the thought of ever owning your own property may seem like just a distant dream. However, there are several solutions that can see you get your foot up onto that property ladder without the need to save up for such a huge deposit.
Help to Buy
Help to Buy is a Government scheme that aims to help first time buyers by offering the chance to secure a property with a deposit of as low as 5%. The scheme is split into 2 parts. The first part is the Equity Loan, which sees the Government provide you with a 20% loan, interest free for 5 years. The second is a Mortgage Guarantee. Here the Government guarantee 15% of your mortgage, with the lender, so you only need to provide a 5% deposit. The mortgage guarantee is a deal between the lender and the Government, so you don’t need to worry about paying anything other than the deposit and your mortgage repayments. To make things clearer, NatWest have created a Help to Buy infographic, which provides a visual explanation of how it all works which you can find here.
Shared Ownership Schemes
Shared ownership schemes allow you to purchase part of a property (25% – 75%) and rent the rest from either a local authority or housing developer. As you’re only purchasing part of the property, this means a lower deposit. Obviously, the downside to this type of scheme is that your property will not entirely be your own, however, you are able to buy more shares in your home at any time and eventually you may be able to buy the entire remaining equity.
Guarantor Mortgage
A guarantor mortgage works by passing on some (or all) of the liability for a mortgage onto another person. If you are unable to keep up with your mortgage repayments, the responsibility to do so then lies with the guarantor. The guarantor acts as a form of extra security for the lender, so they are more likely to offer a smaller deposit. Of course, this puts a lot of financial responsibility onto your chosen guarantor so make sure you have a strong relationship with this person before going ahead with anything. This form of mortgage usually works best between parent and child for that reason.
These are just a few different options and there are still plenty of other ways you can get around paying a large initial deposit. Looks like getting your foot on the property ladder isn’t quite as unobtainable as you first feared.
This is a great opportunity for first-time buyers but it will only drive property prices higher in the long-run. If people can’t afford a mortgage then prices need to fall. That’s not politically acceptable of course, so they continue to pump the system with money. One day the bubble will pop (again).
Myles Money recently posted..Fukushima 2015