Getting on to the property ladder for first time buyers – how can Brits ever afford their own home?

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Getting into the property markets can seem like a challenge for first time buyers, who will be looking at buying a new home or property without any prior experience in this area. With the cost of UK property rocketing and with the markets expected to do even better in 2014, you can only expect the prices to rise all through the year, which is a cause for concern amongst those who have a limited income (and even those who think they have a pretty decent one!) UK prospective buyers face the age old debate: to rent or to buy? Unfortunately, it seems many don’t even have the choice, as saving an average £60,000 deposit to obtain a mortgage is simply impossible.

Those who are planning to buy a house in the city of London would need to have especially deep pockets, as the cost of real estate in the city has seen a huge increase this year. This would mean that first time buyers would have to explore other options on the outskirts of the city or the suburbs, if they want to be able to afford the costs.

But that’s just the problem – many people, especially younger people, simply can’t afford those massive costs anywhere in the country. Solicitor fees, estate agent fees, moving fees and mortgage deposits can put many people off even contemplating the idea of buying a flat. Called ‘The Parent Trap,’ many young people are living with their parents for longer. Some younger people also have other debts to consider before considering buying. Costs of computers, cars and education means many younger people have already taken out other kinds of loans, which counts against them in the application process. This includes credit cards and short term loans. According to wonga.com, 35% of younger people take out short term payday loans for things like car repairs.

If you are a first time buyer you may be put off by the figures, but there are a few steps that you can take that will help you to become a homeowner.

Understanding the basics of the property markets   

In the property markets you will not be able to purchase a first time mortgage, which offers a 100% loan also known as LTV (Loan-to-value). All banks shy away at the prospect of offering such a deal deeming it to be too risky an investment, with even the FSA having strict guidelines about the amount to be disbursed. There has been a belief in the real estate markets that high LTV deals in the past were responsible for the high levels of inflation in the property markets. This lead to property prices soaring, which has made owning your own house a difficult task to accomplish – especially for first time buyers. Almost all mortgage lenders now have made it mandatory to deposit a certain percentage of the actual value of a property, which has increased the difficulties for first time buyers.

Find an alternative way to finance the deposit: You can explore the possibility of getting the deposit or at least a chunk of it financed from a family member or even close friends. Of course this would entail having a great deal of mutual trust, with the surety that the loan amount will be repaid promptly by the borrower. This is one of the best options for a first time buyer to seek help. If you manage to rustle up a decent deposit, you stand a better chance of getting a better deal on interest rates on the mortgage, besides the possibility of lower fees which will be a big help when buying a house for the first time.

Opt for a guarantor mortgage: This scheme would need a family member, a relative or even a very close friend to sign up as the guarantor with their annual income being analysed. This could gain you a higher loan amount and even a better deal. If as the buyer your personal income does not offer you the luxury of a decent sum as a loan, having a guarantor who has a higher salary will serve a good purpose. Of course, having someone take the onus as a guarantor, especially for a large sum of money, would need you a lot of trust.

Combined Ownership: Part rent, part buy can be a pretty effective way to finance a first time buy. The percentage could vary between owners with 50% being the ideal percentage, with the actual percentage being left up to the discretion and financial resources of both co-owners. A housing association would own the other percentage, which you would pay rent for. You won’t need to find a massive deposit, and you get a small step on the property ladder – you can even buy back more shares as your financial situation improves further so that you eventually own 100% of the property.

These are few options for a first time buyer to climb the property ladder in the UK, which although difficult, is not impossible to achieve. Savvy financial planning and teaming up with others is a good way to get started – but seek financial advice from a professional before making any big decisions.

Author Bio: The writer works in the mortgage markets and has advised numerous first time buyers on making their first property purchase.