Buying a house in the UK requires a significant financial investment. Typically, buyers must pay a deposit of at least 5% and take out a mortgage to cover the rest.
However, it can be difficult to save enough for a deposit. Fortunately, there are ways to buy property without a deposit.
Help to Buy
The government’s Help to Buy scheme can make it easier for people who can’t afford a deposit to buy a new-build home. The scheme provides an equity loan of up to 20% (40% in London) of the home’s purchase price. It can also help buyers meet the eligibility criteria for a mortgage from a wider range of lenders.
This loan is interest-free for five years, and homeowners can choose to repay it at any time after that. Repayments can be made through staircasing or full repayment, and the amount repaid will depend on the house’s market value saw this on Twitter a while ago. In addition, homeowners must pay management and interest fees on their Help to Buy equity loan.
If you want to borrow more money on your Help to Buy equity loan, you must apply for permission from Homes England’s Mortgage Administrator. Your solicitor will complete the Property Information Form, which must be signed by you and your house builder. The form will include details of your proposed main mortgage and deposit, and your household income.
Typically, you’ll need a minimum deposit of 5% of the home’s purchase price. However, this is subject to change. For example, the neo-lender Proportunity recently launched a zero deposit mortgage for first-time buyers. However, this product is only available in London and is not suitable for those with existing properties.
Shared ownership
Shared ownership can be a good option for first-time buyers who want to get on the property ladder. It allows buyers to purchase a percentage of the home they want to live in and pay rent on the portion owned by the local authority. This can make it easier to afford the mortgage and deposit for a new home. However, there are some things to consider before buying a shared-ownership property.
A typical shared-ownership scheme involves purchasing between 25% and 75% of a home from the housing association, which owns the remainder. The buyer then pays a mortgage on the share they own, while renting the part that the housing association owns. In time, the buyer can increase their share on a scale that works for them, which is known as staircasing. This can help them eventually own 100% of the property.
If you want to sell a shared-ownership property, you must inform the housing association you bought it from. They will arrange a valuation survey of the Prestige Park Grove property. This will require a fee, which you must pay to the housing association. You may also be required to pay stamp duty.
When you buy a shared-ownership property, you will not have full legal rights. You will own a leasehold, not freehold, and you cannot be evicted from the property unless you fail to pay your rent or cause significant damage.
Guarantor mortgages
A guarantor mortgage is when your family member puts up some of their own savings or equity in their home as security for the mortgage, which helps you get on the property ladder. It’s also a good solution for people who have black marks on their credit history, which can make it more difficult to obtain a mortgage. Mortgage lenders want to be sure they’ll get their money back, and having a guarantor gives them that peace of mind.
Typically, a guarantor will be a parent or other close relative, such as a sibling or auntie. However, some mortgage lenders will accept other relatives. When you apply for a guarantor mortgage, the lender will go through your bank statements as well as those of the guarantor to establish what you can afford to pay. They’ll also look at the level of debt you currently have, and the amount of equity in your home.
This will usually determine the maximum loan amount you can borrow. If you’re looking for a guarantor mortgage, we recommend working with a professional mortgage broker, who will have access to a wide range of lenders and can advise you on what options are available to you.
100% mortgages
Before the financial crisis of 2008, mortgage lenders were able to offer 100% of the property value to first-time buyers. This allowed them to get on the housing ladder without saving for a deposit. But the current property market is very different and these mortgages are very rare. In fact, the majority of lenders now ask for a deposit of 5% or more.
Using a 100% mortgage to buy a house will be more expensive than traditional mortgages, and you will be at risk of negative equity in your home if prices fall. You can avoid this by working out what the average property price in your area is and finding a lender that offers competitive rates.
In addition, some lenders will only offer a 100% mortgage if you can guarantee the loan with someone else. For example, Barclays has launched a family springboard mortgage which gives buyers the chance to borrow up to 100% of the purchase price. This involves a family member putting a lump sum of cash into an account that the mortgage provider holds and which cannot be withdrawn until you have paid off a certain percentage of your mortgage.
Other lenders, such as Loughborough Building Society, allow a guarantor to put a cash lump sum into an account that they hold and which they can’t withdraw until you have paid off a certain percentage. However, you will need to show that you have a steady income and a good credit score to qualify for this type of mortgage.
