For some, owning property has always been considered a distant dream, one that, with every passing year, seems more and more out of reach.
With every news headline, rise in interest rates, rise in cost of living, and rising house prices feels like a saw cutting away the bottom rungs of the property ladder, making that climb ever more difficult. However, like a gleaming light at the end of the tunnel, recent headlines predict a fall in mortgage interest rates, triggering a new wave of buyers exploring their options to gain a foothold on the property ladder. So what options are out there? Are they affordable? Are you eligible? Let’s explore some of those options that could make 2025 the year you become a homeowner.
Save, save, save
Those who have bought and sold will repeat the sentiment that you need to start saving as soon as possible, whilst not terrible advice, it understandably evokes somewhat of a visceral reaction from those who have been saving all they can whilst suffering from the rise in costs in the renting market. Saving is not always easy, but there are ways that you can maximise your savings potential. Lifetime ISAs (Individual Savings Account) are a great example of this, offering a 25% bonus for those saving for their first home, with every £4000 saved in a tax year granting a £1000 bonus towards your first home up to the value of £450,000.00. To quote one of the UK’s leading supermarkets, every little helps!
Low-deposit mortgage options
Whilst there are instruments out there to assist in your savings, UK finance reports the average deposit paid by a first-time buyer at £34,500. To some, this figure seems way beyond arm’s reach, and again, the dream of owning property becomes just that, a dream.
Fortunately, this is not the be-all and end-all, 95% loan-to-value (LTV) mortgages are more readily available now than any time since the financial crash in 2008, so suddenly the deposit figure that seemed beyond comprehension gets slashed…by half!
Yorkshire Building Society offers a £5000 deposit mortgage, with the lender covering as much as 99% of the purchase price. Skipton Building Society has also introduced their affordable mortgage scheme whereby they can offer as much as 100% of the purchase price to buyers that can provide a track record of rent payments that exceed the proposed mortgage payment. Whilst seeming fictitious, these options have assisted thousands of new buyers in entering the property market.
Shared Ownership
When travelling around the UK, it is impossible not to notice the abundance of new build sites being offered by developers in beautiful areas of the country. These sites, in conjunction with the local councils, are offering a scheme called “Shared Ownership”.
Shared ownership means you buy a percentage of the home with the ability to buy further shares in the future, with some allowing full 100% ownership. If necessary, you take a mortgage out to help you purchase the initial share of the property and pay rent based on the further shares retained by the Housing Association. Whilst the combination of mortgage payments and rent payments equates to similar outgoings to a standard mortgage, the reduction in amount required for a deposit opens the floodgates for not only first-time buyers but existing homeowners to get their hands on some of the most stunning new build properties being offered today.
Another benefit of this scheme is you reserve the right to postpone any Stamp Duty payments until you own over 80% of the shares in the property but its important to note that you will pay stamp duty based on the rules in place at the time of staircasing over 80% and not the rules in place when you first purchased the property if you decide to postpone.
‘Income-boost’ Mortgages
It is not uncommon for family members to assist in the purchase of property, but many simply do not have the disposable income to gift large amounts of money upfront as a gift for these purchases. An option available to those family members that want to help but do not see it as a possibility should consider an ‘income boost’ mortgage, also known as a Joint Borrower Sole Proprietor mortgage.
Essentially, up to three family members can be added to the mortgage as “boosters” to increase the total amount the purchaser can borrow, making it easier for low-income earners or young people early in their career path to get the financial boost needed to enter the property market. While it seems too good to be true, it is important to note that the ‘booster’ family members are jointly liable for the mortgage in the event the buyer is unable to make repayments, creating a risk factor for those involved.
Professional Mortgages
Lenders are also known to offer “professional” mortgages offering loans up to six times their income to assist in them purchasing homes. These include professions that are regulated or accredited, such as doctors, architects, and accountants. Whilst not as common, specialist lenders also offer deals to particular professions, such as Kensington, offering better earning calculations on NHS staff, police officers, firefighters, and teachers by considering overtime payment and a second income, allowing them to improve their borrowing amount.
Purchasing a home can certainly seem like an unattainable goal, but with the right advise and the right schemes there are avenues available to elevate those who are curious about purchasing into a new homeowner. For more information on any of these schemes, please contact us at Fisher Jones Greenwood Solicitors as we assist you in entering the property market in whichever way you choose.
How can we help?
James Harvey is a New Build Assistant in our Residential Conveyancing team, specialising in new build transactions, shared ownership, and residential transactions.
If you have any queries on the above subject, please do not hesitate to get in touch with James on 01206 217519 or complete our online enquiry form.