Help For First-Time Buyers

It's not surprising that first-time buyers (FTBs) tend to be older these days -- it takes longer to save for a deposit for a start -- but perhaps expectations are higher than they were when their parents were buying their first home, too. With nigh on 70% of the adult population owning their own home, it's understandable that those new to it expect to be able to do the same. But the housing market has changed considerably over the last thirty years and FTBs need to change and adapt.

So, setting aside the question of whether now is the 'right time' to buy (i.e.: will prices rise or are we facing a market crash?), what can the FTB of today do to achieve their goal of owning a home?

Get help from parents

This is not an option for some people but, according to a recent report, two-fifths of FTBs are getting help from their parents -- usually in the form of a deposit. If your parents can afford to give or lend you a lump sum to help you bridge the gap between the price of a home and the mortgage you can support, then don't turn down such an offer if they can afford it.

Alternatively, they may be happy to buy the house with you on the understanding that you will buy them out of their share later when you can afford it or that they get a share of any growth in value when you sell up. You could ask them to act as guarantor for the mortgage but that would mean a big commitment on their part -- if you fail to meet your mortgage payments they'll be lumbered with them.

Get a graduate mortgage

Following on from parental help, you might find that you qualify for a graduate mortgage. These enable you to borrow more than the standard amount based on your salary with the help of a guarantor such as a parent. They're different to standard guarantor mortgages in that the guarantee is only for the portion of the mortgage that is over and above the standard amount as opposed to the entire mortgage. The guarantee lasts until the borrower is earning enough to cover the whole loan at which point the guarantor is released.

So if your parents aren't in a position to guarantee the whole mortgage, they might be able to back up part of it. As long as you can afford the actual repayments yourself, they shouldn't be out of pocket.

Buy with a friend

You might not be able to afford to buy by yourself but you could possibly manage it if you went halves or even thirds with a friend or two in the same position. This method is becoming increasingly common -- after all, if you've been renting a flat with your best mate from university for the last couple of years, why not continue sharing but in your own home.

There are major considerations though (such as what happens when one person wants to sell but the other doesn't) so make sure you agree, on a legal basis, the ground rules before signing on the dotted line. Each of you should have your own solicitor to look over any legal agreements to ensure you are fully protected from your co-owner should the friendship go pear-shaped.

Get a lodger mortgage

It's now possible to get a mortgage which takes account of the expected extra income from a lodger. So even if you don't earn quite enough to manage the mortgage by yourself, it may be feasible with help from a lodger. You can earn up to £4,250 a year under the Rent-a-Room scheme without having to pay tax on the income and this extra income might just make the difference when it comes to affordability. If you ask a friend to be your lodger it won't be much different to renting a flat with them. Otherwise, choose your lodger carefully!

Get a longer mortgage

The usual length of a first-time mortgage is 25 years which sounds like a scarily long period of time. But it's not unusual for people to upgrade to their next home a few years later and take out a new mortgage for exactly the same length of time. So the idea of looking for a 30-year mortgage in the first place, or maybe even longer, needn't be dismissed out of hand.

These days some lenders are looking at affordability rather than straightforward income multiples. Being offered three or even four times your gross salary isn't much use if you live in an area where house prices are rather higher than that. But if you could get a mortgage that was spread over a longer-than-usual period so that your monthly payments were lower, it might make it more affordable.

The crucial thing to look for is that, even if there is an initial lock-in period, you subsequently have the facility to overpay when you can afford to. The longer the mortgage, the more you'll pay overall so your ultimate aim should be to overpay when feasible thus reducing the length of the mortgage term.

Key Worker Living Programme

If you work in the education, health, police, fire or prison services, you could try the Key Worker Living Programme, which is geared towards key workers who can't afford to live near to where they work.

The government is pumping £690 million into the programme, which will offer a variety of help in the form of subsidised loans or shared ownership depending on the type of scheme being offered in your local area. Bear in mind that, as it's aimed at areas where house prices are considered to be prohibitively expensive, at the moment it is only available in London and the South East.

Right To Buy Scheme

The Right To Buy scheme enables local authority secure tenants with at least two years' tenancy to buy their homes at a discount price.

HomeBuy Scheme

The HomeBuy scheme is a government-led initiative offered by the Housing Corporation and is sub-divided into three sections:

• New Build HomeBuy, where you share ownership of your home with a housing association and pay rent for the proportion you do not own;
• Open Market HomeBuy, where you part-buy a property and get a loan from a housing association for the rest; and
• Social HomeBuy, where housing association and local authority tenants are helped to buy their current home.

In 2005, the First Time Buyers' Initiative was also added to the HomeBuy scheme. Under this scheme, the government plans to make 15,000 homes available over five years, primarily to key workers. It is another shared equity scheme, with English Partnerships owning the remainder of the equity up to a maximum of 50%.

Some of the above options may not be appealing or even feasible in your own circumstances. But it is a rare homeowner who will tell you that they managed to get on the property ladder without making any initial sacrifices of any kind. These options all offer possible solutions that are comparatively short-term and you may spot one that hadn't occurred to you. If so, investigate further and then wrestle with the troublesome question of what the housing market's going to do and whether now is the right time to buy!