If you’re a first-time buyer struggling to get onto the property ladder, you’re not alone.
According to the Office for National Statistics, average house prices in the UK have risen by 12.4% in the last year taking the average house price to £281,000 — an increase of £31,000 in the last 12 months.
To add further sting, average salaries are struggling to keep up with rising house prices. In 2021, average house prices were around 65 times higher than they were in 1970. In contrast, average weekly wages were only 35.8 times higher.
As a result, saving for a deposit on a house can be difficult. In fact, it takes a first-time buyer an average of eight years to save towards a deposit. Mortgage rates are also on the rise, forcing many first-time buyers to put their plans on hold.
But, don’t despair! You have options. Here are some alternatives if you’re a first-time buyer struggling to get on the property ladder.
A joint mortgage is a mortgage loan with two or more joint owners who share responsibility for paying the monthly mortgage repayments.
Usually, this type of mortgage loan is taken out by couples but they’re also popular with friends and relatives who might not be able to get a mortgage as single applicants. How much each owner pays is decided between the joint owners.
The main benefit is that by putting two incomes together and forming a collective buying power, you can borrow more money. Joint borrowers can also pool their savings to use as a higher deposit. As a result, you’ll be able to afford a more expensive home in a more desirable area.
One of the main issues with joint mortgages is that if someone in the joint-mortgage agreement has a poor credit record, the amount joint owners can borrow might be affected, as might everybody else’s credit records.
And if one person in the joint ownership agreement stops making their share of repayments, the lender could take action against all joint owners in the agreement.
Shared ownership is scheme whereby you can buy a share of a new build or resale property and pay rent on the rest. Typically, you’d buy a share between 25% and 75% and the annual rent would usually be around 2.75% of the property’s value.
Because the value of what you’re buying is less than if you were to purchase property in full, the deposit required is a lot smaller, making it a lot easier to save up. Likewise, it’s easier to be accepted for a mortgage on a shared ownership scheme as the amount you borrow will be less.
But as with anything, there are downsides. Technically, you’re still a tenant on a shared ownership scheme so you can be evicted for not paying your rent or sub-letting. This rule stays in place until you’ve ‘staircased’ up to 100% ownership, which is becoming increasingly hard to do. In 2018, a YouGov survey found that almost 90% of shared-ownership buyers had not staircased at all in their property—mostly because they couldn’t afford to.
With shared ownership, you’re also not eligible for first-time buyer stamp duty exemption and you’ll have to pay service charges for maintenance of communal parts of the building. Because shared ownership properties are leasehold, you might also have trouble selling your property if the lease is less than 80 years. The lease extension process can also be expensive.
Guarantor mortgages are when a parent or close family member takes on some of the risks of your mortgage. Usually, this is done by offering their home or savings as security against your home loan.
By having a guarantor, you’ll have a better chance of getting a mortgage and you might be able to borrow more money. In some cases, you might be able to borrow the full 100% of the property’s value. If you miss a mortgage payment, the guarantor is responsible for covering it. At the same time, they’re liable if your property has to be repossessed or sold.
Any close family member can be your guarantor so long as they have a good credit history and sufficient savings or property value in the background. They should also speak to a solicitor so that they’re fully aware of the risks.
These days, guarantor mortgages are difficult to find. Most lenders instead tend to offer joint borrower sole proprietor arrangements, in which a parent, friend or family member can contribute to your mortgage without being a legal co-owner.
How Adjoin Homes compares
While joint mortgages, shared ownership schemes and guarantor mortgages have their benefits, they also have their downsides. Plus, you may not know anybody to enter a joint mortgage or guarantor mortgage agreement with and the home you want might not be available on a shared ownership scheme.
But with a rent-to-own scheme from Adjoin Homes, you can get a mortgage for your dream house in the area of your choice. We provide tailored packages and payment plans to suit your circumstances—even if you’re a sole applicant.
There’s flexibility too. If you want to purchase the property in full or change your mind and want to walk away, you can do so at any point during your agreement and for up to 12 years.
If you’re a first-time buyer struggling to get on the property ladder, don’t despair because you have some options. Whether that’s a joint mortgage, shared ownership scheme or guarantor mortgage, there are alternatives available but they do have their pros and cons.
The best option is a rent-to-own scheme from Adjoin Homes. Our tailored packages allow you to buy your dream home in your dream area with a payment plan that suits your circumstances.
With Adjoin Homes, you can get in your dream home now.