...But a small deposit is holding you back. You've managed, with a lot of hard work and economies, to save up a couple of thousand, but you know that realistically, this will soon be swallowed up by costs. Buying a house isn't cheap, certainly not when you factor in all the costs such as legal fees, new furniture, moving costs and so on. What's the solution? Is there any alternative to waiting and saving up for years?
You might be surprised to find there are a few potential solutions to this problem. Difficulties finding a large enough deposit for a house is a common problem for first time buyers. With interest rates as low as they currently are - at the time of writing, July 2012, the Bank of England base rate is still at 0.5% - getting a good return on cash savings is no easy matter.
The days of 100% mortgages are also no longer with us and if you have less than a 15% deposit, you will find it difficult to get a favourable rate of interest from the majority of lenders. The average price of a house in the UK, as shown on the Land Registry's website for May 2012 stands at 161,677 pounds, meaning that to buy an average house, requiring a 15% deposit from the lender, you would need to have at least 24,251.55 pounds, and that's not taking into account all the extras involved in a house purchase as mentioned above (1). That's more than the average UK salary of 24,000 pounds (2).
However, lenders are starting to realise that first time buyers are struggling and are coming up with some ways to help. Worldwide's mortgage team have been keeping an eye on the market and have seen some potentially useful new mortgage deals for first time buyers that get round the problem of small deposits. What we have also done is investigated the small print involved in these deals as they have some potential pitfalls.
Their selling point is that instead of requiring a deposit, they will accept a guarantee from close family members, usually parents or grandparents, in the form of their residential property. It means that a mortgage can be available to you as a first time buyer up to 100% of the property purchase price or valuation (whichever is the lower). This is obviously not going to suit every first time buyer; however, there are many that it will suit. If your family are eager to help you out with buying your first home and have a residential property they are willing to use to guarantee your mortgage, then one of these deals could be ideal.
But, as always, caveat emptor - buyer beware. And in this case, be doubly aware. If you decide to go ahead with one of these deals, we highly recommend that you take both independent mortgage broker advice and thorough legal advice to make sure that everyone involved is entering into the deal fully informed of what they are undertaking and of any possible risks. The biggest risk, of course, that your family would be taking on is the possibility that their property could be repossessed if you were unable to keep up repayments on your mortgage. Even though that's something unlikely to happen, it's better to be aware and prepared for eventualities. Your independent mortgage broker will be able to explain all these matters to you.
By taking out a guarantor-backed mortgage through an independent mortgage broker, you give yourself and your family an extra safety-net: all good independent brokers will make sure that you understand and are happy with all the terms and conditions, and they will make sure that all the necessary legal work is undertaken, along with all the usual mortgage safeguards.
If you would like more information about this type of mortgage, get in touch with us today.
About the Author:
For a free mortgage review, call
Ronan Marrion on
0845 230 9876,
or take a look at our website www.wwfp.net.
Your home may be repossessed if you
do not keep up repayments on a mortgage or other loan secured on it.
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