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A First Time Buyer's Guide to Getting on the Property Ladder

Mon 24 Feb 2014

If you are reaching the stage in your life where your number one priority is to buy your first house, but you simple don't have the savings to make a substantial deposit, then don't worry. It can be tricky getting a foot firmly on the property ladder and banks don't make it easy by demanding high deposits.

Owning your own home doesn't have to be a fantasy though, if you don't have a pile of money lying around, then check out these great ways that can help you become a home owner and end up living in the property of your dreams:

New Build Deals

It is a common assumption that new builds are much more expensive than older houses, but it is often actually the other way round. If you have a very small deposit, or even none at all, they can often provide a great opportunity to get onto the property ladder.

Property developers and construction companies are aware that first time buyers can often struggle with saving up a big deposit, so many schemes often ensure that a provision for affordable housing is put into contracts before the homes are even built. They can lend you the money for a deposit, meaning you have to borrow a great deal less for a mortgage.

If a property developer lends you 20% of the total property value, you will then only need to apply for 80% for the mortgage, making the whole situation a lot easier and more affordable. Every developer and company is different, so make sure you know what you are signing up for first.

Guarantor Mortgages

A guarantor mortgage involves someone close to the buyer acting as a guarantor on their behalf, ensuring that the mortgage repayments will be made on time. To be accepted as a guarantor, the person will most likely have to be a home owner themselves, as they will need to make the payments if the buyer doesn't.

The guarantor mortgage is great if you only have a small deposit, as it offers the lender much greater security, meaning they don't have to worry as much. They may even offer you a larger sum based on the income of your guarantor.

This is a fantastic situation for parents looking to help their kids get on the property ladder without actually having to give them the money for a larger deposit. It is however a very big step to make, and the person offering themselves up as a guarantor will be putting their own financial situation at risk if you were ever to miss a payment.

Shared Ownership Schemes

This scheme allows you to buy part of a property (usually no more than three quarters or less than one quarter) and then pay rent on the remaining parts of the property from either a property developer or a local housing authority.

By purchasing only a part of the property, you will need a smaller mortgage and therefore a smaller deposit. This can be a great solution if you are really struggling to save up enough money to get the deposit you need.

There are some downsides to this scheme, however. The first being that you will never actually own the property, only part of it, you will be able to buy the remaining equity at some point though if you find yourself financially able.

The other downside is that although you will have a mortgage out on the part of the house you own, you will still have to pay rent on the rest of the house, so your full payments will end up being more than just to your mortgage lenders.

Buy a House at an Auction

If you are a dab hand at DIY and not afraid to put in a good few weeks or months of elbow grease, buying a run down house at auction could be a perfect solution. You will still need a mortgage for a house bought at auction, but with a lower priced house you would need less money up front.

It pays to be wary with auctioned houses, as they tend to be the ones that were unsuccessful on the open property market due to some fault or other. This means you are going to need the time, skills and funds to renovate a house if you buy it at a cheap rate to start with.

If you have quite a strict budget, it may be an idea to try and calculate the potential renovation costs before heading to an auction, because the last thing you want is to run out of funds half way through a house project and end up out of pocket and regretting the whole situation.

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