How to start on the property ladder – a phrase many millennials will dread searching to find the answer to.
In the modern-day housing market, it is no secret that individuals are finding getting on the property ladder the most difficult it has ever been, and with interest rates increasing year on year, the prospect of beginning the process can be an incredibly daunting one.
Thankfully, this is not an issue which is being ignored by the government. With several new finance options now available, the dream of owning your own home can become a reality, sooner.
So, what are these options? We’ve compiled a handy list below, explaining some of the most desirable options.
How to Start on the Property Ladder
- Assess the Situation and Seek Advice
Taking the time to seriously consider what exactly it is that you are looking for, and how much you can actually afford, seems like an obvious point. However, due to a number of factors, cost and pride being a couple, fewer millennials are seeking professional advice when it comes to their finances.
By seeking a reputable mortgage advisor, you alleviate any stress or worries you may have and gain valuable knowledge into a world which may currently appear alien to you.
Personal Finance Options
The ideal situation is to have been saving since you first became employed. However, especially in today’s world, where we have access to a wider choice of exciting and expensive things to pass our time, this is a highly unlikely option.
However, beginning the saving process today can benefit you immensely in the long run, as the higher the deposit, the lower the mortgage, and the greater chance you have of stepping onto the property ladder, faster.
- The Bank of Mum and Dad
The original support system for most, if you are lucky, Mum and Dad can lend a helping hand.
Whether this is through cash for your deposit, or through purchasing a house for you, eventually allowing you to purchase it from them at a subsidised price, sometimes the ‘Bank of Mum and Dad’ can be a real money saver.
- Buy with a friend
To some, this option will sound like the perfect idea. Buying your first house with someone you love and trust sounds like a huge opportunity for fun times and making happy memories.
However, purchasing a house with a friend or partner can sometimes be detrimental to your first time buying. It’s advisable to be cautious when considering this option – is there any chance that you and your friend could decide to part ways in the next few years? Do you both have the same aspirations for the property? Or have you lived together previously?
Splitting assets within a house can be an extremely emotional, expensive and lengthy process, so ensure you take care when opting for this method.
- Help to Buy Scheme: Equity Loan
A heavily publicised option for first-time buyers, the governments Help to Buy Scheme has the potential to fast forward your dreams of owning your own home.
Here’s how it works: the government offers new-build homes to first-time buyers and home movers, with the enticement of a reduced 5% deposit. The government will then lend the individual up to 20% of the value of the property in an ‘equity loan’.
This means that, rather than your mortgage being 95%, it is a more affordable 75%, and with the first 5 years being interest-free, the overall scheme appears a very affordable one.
- Help to Buy Scheme: Shared Ownership
The second Help to Buy Scheme available, Shared Ownership may be the route for you.
Focusing primarily on a split of buying and renting, the scheme is exclusively aimed at first time buyers. You will own a share in the home, and rent the rest at a reduced rate, sharing ownership with the government until you decide, should you wish, to purchase a greater percentage from them.
With a mixture of new builds and existing homes available, this is also an attractive option.
- Help to Buy ISAs
Help to Buy ISAs are a good way to begin banking money which is tax-free until you are ready to buy your new home.
You can begin with as little as £1,000, and after monthly saving, you can eventually earn a 25% government bonus towards your purchase – a valuable way to increase your deposit in no time.
- Lifetime ISA
Differing slightly from a Help to Buy ISA is the Lifetime ISA, which offers a 25% government top-up annually, with the potential of a cool £1,000 being deposited into your account each year.
The only major difference between the two similar ISAs is that with the Lifetime ISA, you can buy a property up to the value of £450,000, but only up to £250,000 with the Help to Buy ISA.
- Starter Homes Scheme
An interesting opportunity for first-time buyers, the Starter Homes Scheme endeavours to build 200,000 new affordable homes, sold at a discount starting from 20%.
Work on these homes began in January 2017 and look to be an interesting option to consider.
- Right to Buy
A viable option if you have previously been renting a council house, the Right to Buy scheme offers discounted rates on the home you are currently living in, if you have been residing there (or in another public sector tenanted home) for a minimum of 3 years.
Inspired to get started on the property ladder? Take a look at our houses for sale in Cumbria. Should you have any questions, do not hesitate to get in touch with a member of our friendly team – we are here to help you find the first home of your dreams.