Getting on the Property Ladder
As most people know the mortgage market is in something of a mess at present, and funding has all but dried up for lenders, who have found it more expensive and difficult to secure funding for their mortgage lending operations. This has made it more difficult for first time buyers to get onto the property ladder, as many cannot raise enough cash ? or deposit ? to purchase a home on the market in the normal way.
There are a number of options open for those that are looking to get onto the property ladder, and whilst the choice is not as great as it once was due to lack of affordability there are still some solutions that could help those desperate to get onto the property ladder to achieve their dreams. Of course, one option is to simply wait it out and see whether things are any better once the mortgage market rectifies itself, but some industry officials are predicting that this could take years, and many may not want to keep throwing their hard earned cash on renting someone else?s property for so long.
One option for those wanting to get onto the property ladder is shared ownership schemes, and these are offered in conjunction with housing associations. The buyer can purchase a certain percentage of the property, such as 25%, 50%, or 75%, with shared ownership. The buyer then rents the remaining share of the property. This means that you will need to take out a far smaller mortgage and will need a far smaller deposit, as you are only taking out a mortgage for a share of the property. You can then buy further shares in the property as and when it is affordable, and can continue to do so until the property is fully owned. Alternatively you can choose just stick with the original share that you bought, and then sell on your share if and when you decide you want to move on.
There is also the recently launched HomeBuy scheme, which is a government initiative to try and get people into affordable housing. With this scheme you can get an equity loan from the government of up to 32.5% and this can be repaid as normal or paid off when you sell the property. No interest is charged on the loan for at least the first five years. This scheme could help more people to get onto the property ladder at a time when the housing and mortgage sectors are experiencing difficulties.
If you do decide to go for a mortgage then you should bear in mind that lenders have really tightened up on credit conditions, and this means that you may find it difficult to get the mortgage you need. Many now want higher deposits than the traditional 5%, so you may have to pay more upfront as well. Also, remember that the interest rates on many mortgage products have been rising, so make sure that you can comfortably afford the repayments before you make any commitment.
Peter Kenny has been writing financial articles for 10 years and is a writer for The Thrifty Scot, please visit us at Homeowner Loan and Remortgage Visit What to look for in a savings account
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