Can you get on the housing ladder?
Published 17 October 2016 by Linzi Nuttall
8 million say that a mortgage is out of reach but it doesn’t have to be this way.
According to a recent survey by the Post Office, 8 million of us – that’s two in five renters – never expect to buy our own home. The one in eight who said they will make it onto the first rung felt that it would take them eight years to save a big enough deposit, while 7 million expect to take over a decade to get their deposit in check.
More than half of those in rented accommodation said that their main reason for not owning a home was that the deposit and mortgage repayments were out of their reach. And a small percentage of those surveyed preferred the idea of renting as it gave them more flexibility to move around, so weren’t interested in buying.
If you want to be able to buy your own home, read on – we’ll give you some tips.
Make small steps
Though it may sound like a mission getting onto the property ladder, don’t despair and lose hope – start saving today. The average age of those expecting to buy in Britain in 2016 is around 34 years old, but it’s all about doing it when the timing, affordability and available property is right for you.
The average deposit a first-time buyer needs to save is £33,960 and £95,693 in London. Wherever you’re looking to buy, that’s a lot of money to save and will seem a staggering mountain to climb doing it alone. If you aren’t lucky enough to inherit some money from family, or get a donation from the bank of mum and dad, then you need to look at different ways of buying your first home.
No man is an island
One way you might be able to afford a hefty deposit is to consider pooling your funds as a couple, or as a group of friends. The English Housing Survey reveals that almost 90% of households bought are made up of two or more people. If you want a joint mortgage, up to four people can be registered as co-owners, but it’s important to decide how to legally structure the purchase.
You don’t even have to own the same percentage or share of the property. “Tenants in common” allows you to pool your different deposit amounts together with friends who want to get on the property ladder but can’t do it on their own.
If you want to do this, ensure everything is documented in a formal declaration of trust. This is a joint agreement that outlines how much each individual has put into the deposit, expenses and what your mortgage payments will be from the beginning.
As with any mortgage, all parties have to be open and honest about their finances and include outgoings as well as incomings. If one party for some reason can’t afford to cover mortgage repayments then the other shareholders are liable to cover the cost. Make sure you seek advice from a solicitor if you’re considering buying a home with someone else.
Doing it alone
If you don’t fancy partnering up with anyone, then you may think about saving via a Help to Buy ISA. Launched in December 2015, the Government scheme enables you to save into them as well as gain a competitive interest rate. The Government will give you £50 for every £200 you save each month. This contribution goes up to a maximum of £50 a month and £3,000 in total. In August 2016, the Government announced the bonus on Help to Buy ISAs can’t be included as part of your initial deposit, but is paid once the sale goes through.
From next April, you can take advantage of the Lifetime ISA that gives savers the chance to put away £4,000 a year into a pot for a house deposit or retirement. This works in a similar way to the Help to Buy ISA and is set to replace the saving scheme.
These include equity loans that enable with a 5% deposit to apply for an equity loan. Or if you’re under 40, you could also take advantage of the starter loans scheme. The principle here is that first-time buyers get a sizeable discount, up to 20% on homes that cost less than £250k or £450K if buying in London.