More and more first-time homebuyers are finding that
climbing up the property ladder is becoming more and more
like scaling a mountain. The sentiment is brought about by
rising interest rates and skyrocketing house prices. These
concerns are further compounded by the fact that lenders
have stopped offering affordable mortgages. However, these
do not imply that first-time homebuyers are doomed to
struggle forever, as there are other ways for them to go up
that ladder.
According to Nationwide, the price of the average
first-time homebuyer's home in London is nearing
£250,000, and the snowballing effects of five interest
rate increases add £80 a month to the cost of a
£100,000 mortgage. This is proof that the property
ladder is indeed getting harder to reach. In theory, young
buyers are better off compared to the older generation.
They are hard-working, well-educated and are well-paid
However, the significant lack of supply and high prices are
now making them stay off the market.
Obviously, there are solutions to this dilemma, including
more affordable housing, mortgage tax relief and the
cancellation of stamp duty for first-time buyers. In spite
of this, buyers have to wait a long time before they can
start enjoying these perks, if they ever come to
realization at all. Fortunately, there are other options
that first-time buyers can resort to.
Those who are considering a purchase may want to look at
other schemes towards making home ownership a possibility.
The following are some of the ownership methods made
available even for those who have low income.
Shared Ownership
This type of home ownership scheme allows a homebuyer to
buy a share of a property while the rest is owned by a
housing association. This means the consumers pay a
mortgage on the share they own, and rent on the rest. They
can purchase more shares at a later time if they want to.
Eventually, they may have the capacity to afford to buy the
entire property.
This alternative is typically appropriate for those with
regular income, but cannot afford to buy their own homes
outright. Compared to buying a house privately, this option
is considered less risky and more affordable because there
is no need for a big mortgage. Shared ownership plans are
usually run by housing associations.
Homebuy
This plan was initiated to assist housing association and
council tenants purchase property on the open market. The
homebuy scheme typically entails lending 25% of the
purchase price. A buyer uses a mortgage and/or savings to
pay the 75% balance. While he will not be obliged to pay
anything towards the loan until the property is sold, he
has the option to do so. During the sale of the property,
the housing association will take 25% of the sale price, or
less, if part of the loan has already been repaid.
This option is NOT available to:
1. Those who have rent arrears.
2. Buyers who are on housing benefit or have received it
during the past 12 months.
3. Tenants who have violated the terms of their tenancy
contract in the past.
Homebuy is obtainable in some areas only, and the number of
loans is limited. Those who want to avail of said scheme
must contact their landlord or the Housing Corporation.
Starter homes initiative
This alternative was developed for teachers, the police,
nurses and other health workers, and is available to
first-time buyers only. The initiative assists those who
want to purchase a home near the community where they work
but can't afford the property prices due to their
astronomical proportions.
Those who avail of this scheme may be entitled to:
* An interest-free loan
* A lump sum that doesn't have to be repaid until the
property is sold
* A shared ownership contract
Starter home initiatives are not available in all places,
and the number of loans is limited. Most of these plans are
offered in London and the south east. Interested buyers may
get in touch with their local council or the Housing
Corporation.
With these home ownership schemes, first-time buyers have
other options to get a foot on the property ladder. Until
such time when affordability is not an issue anymore, these
alternatives will serve as better opportunities for
consumers to buy their own homes.
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Parmdeep Vadesha is a property investment expert and
founder of the largest community of property entrepreneurs
on the web who buy below market value properties from
distressed homeowners facing repossession, divorce and
bankruptcy. He writes a monthly newsletter for over 70,000
property investors worldwide -
http://www.Property-System.com
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