How Just Mortgage Brokers Can Help You
Getting your foot on the housing ladder can sometimes seem an impossible goal to reach. After the economic crisis which was largely blamed on excessive borrowing, banks and other mortgage providers have tightened controls, are asking for bigger deposits and are making it generally more difficult for people – especially first time buyers to buy a property without a sizeable financial backing in the first place. That, teamed with current house prices can make it extremely difficult for first time buyers to get out of renting.
When looking to buy a property, mortgage lenders are looking for at least a deposit of 5% of the value of the property, with the remaining 95% to be funded via a mortgage. Unfortunately in today’s world, getting together even just 5% of the value of a property is out of reach for many first time buyers.Luckily there are some options to help first time buyers to buy their own property, and start to take their first step out of the rental market.
One option which is available for first time buyers is the shared ownership mortgage. Shared ownership for first time buyers gives you the chance to purchase a portion of a property, splitting it between you and a (usually) housing association or house builder. You then make the mortgage repayments as well as paying a rent to the housing association or house builder.
The premise behind a shared ownership mortgage is that the first time buyer must firstly find an eligible property, then take out a shared ownership mortgage. The buyer must decide what proportion of the property that they are to buy and this is the part that the mortgage is taken out on. The deposit is then based just on the percentage being purchased rather than the full property value and therefore is significantly less than it would be otherwise.
As many first time buyers are starting out at the beginnings of their careers, shared ownership can be an option worth looking into when taking into consideration the sized deposit typically required.
What is Staircasing?
Another benefit for first time buyers from a shared ownership mortgage is that as time goes by, there are options to purchase more of the property from the housing association or house builder – this is staircasing.
It means that as they earn more money or save, they can increase their share of the property – usually increasing the mortgage payments, but decreasing the rent that they pay (in line with the actual price of the property at the time).
Buyers can continue to staircase until they own 100% of their property, making the shared ownership mortgage an excellent option for the first time buyer.
Shared ownership mortgages were initially introduced as part of a government scheme to help low income families to get onto the housing ladder, giving them a chance to be homeowners and out of renting. As house prices continue to keep home ownership out of reach for many, shared ownership schemes offer a realistic option for first time buyers with shared ownership – not just those who are from low income households.
By giving people the option of initially buying a share of the property, taking out a lower mortgage and in turn needing a smaller deposit in the first place, it can be a lot easier for first time buyers with shared ownership to take that first step. To then have the option to buy a higher percentage of the property over time, it can be a viable and desirable option for many potential homeowners.
Taking out a shared ownership mortgage can be an excellent way to take the first step into the housing market. Although it takes a little longer to become the complete homeowner, it does at least mean that eventually it may be a possibility for you. If you are a first time buyer and looking to take your first step into the housing market, get in touch with us today to find out more about shared ownership mortgages.