How to get on the property ladder without a big deposit? It’s a question that’s perplexing a great many people these days and increasingly a concern of young people trying to take their first steps on the property ladder. However, there are still a few ways you can get on the property ladder, without a big deposit.
A rarity, 100 % mortgages
On occasion, you can still get 100% mortgages – but these are rare, and if you do find one, you’re likely to need a guarantor. Usually, a member of your family, who owns a property, will guarantee your mortgage, but remember; you would be putting their home or money at risk if you miss a payment.
Look around, and you may find housing developers that will offer you a loan for the equivalent of your deposit. However, you need to be aware that you will have a double-debt, your mortgage and the deposit loan, that will both need paying off. So, give your finances careful consideration and ensure you can afford both financial commitments, plus your regular household bills.
Help to Buy loans
Another option to consider is a Help to buy the loan, which means you only need to save a 5% deposit to purchase a property. The advantage of this scheme is it would help you on to the property ladder with a smaller deposit, and mean you had access to better deals for your mortgage. With this scheme, a government loan would cover 20% (40% in London) of the purchase price, interest-free for five years, in effect increasing your deposit. So for example, if you were to buy a home worth £100,000, the government equity share would be 20% of the purchase price or £20,000. You would then take out a mortgage on the rest of the purchase price, £80,000, including your 5% deposit of £5,000. You would then pay interest on the government loan, from five years onwards, starting at 1.75% of the amount you owe, charged each year. The rate would then increase annually, by the same amount as the Retail Price Index (RPI) plus 1%.
There are conditions that apply to the Help to Buy scheme, and it is important that you are aware of them before applying to the scheme. In England, the maximum purchase price is £600,000; the property must be a new build and built by a developer approved by the Homes and Communities Agency. Also, the house must form your main home and not a holiday, second home or a property that you plan to let out. Crucial too, is to remember that the loan is an equity loan; it is not fixed and will fluctuate according to the value of your home. So there you have a brief introduction to the scheme, to understand Help to buy in greater detail, speak to an experienced mortgage broker. Remember too, that the scheme has some variations in Scotland, Wales and Northern Ireland, so check details before you apply.
The Help to buy scheme could help you purchase a property with a smaller deposit and have access to better mortgage deals, so to find out about help to buy Barnsley, contact an experienced mortgage advisor today.
So there you have a few options for purchasing a property even if you have a small deposit, we hope you’ve found this helpful and that you’ll soon be moving into a new home.