Five tips to get you on the property ladder
ONE: Find a high LTV deal
Back in the days of easy credit, 95% loan-to-value (LTV) mortgages were everywhere, but since the credit crunch hit, LTVs have been peaking around the 85% mark. This has meant that the deposits required have become stratospheric - well out of reach of most young people looking to buy their first home.
However, this is beginning to change. Saffron recently launched a 95% LTV mortgage at 6.49% fixed until 2015, for example, while Mansfield Building Society now has a three-year discount rate, currently 4.64% at 90% LTV.
TWO: Get a loan from your family
If you can't get a high LTV deal and you don't have the money for a hefty deposit, see if your parents or other family members can help. Taking out a loan from a bank is pricey, and mortgage providers aren't keen on the idea of monthly repayments.
But a loan from the bank of mum and dad, which you can pay back later, will keep your lender happy.
THREE: Apply for a guarantor mortgage
With a guarantor mortgage, your parents don't have to stump up any cash, and instead are liable to cover all or part of the loan in case you're unable to repay it.
Alternatively, you could apply for a Lloyd's Lend-a-Hand mortgage. This is similar to a guarantor mortgage in that it requires parental help, but instead of guaranteeing the mortgage, your parents have to commit 20% of the purchase price in savings with the lender.
FOUR: Try a shared ownership scheme
Shared ownership schemes allow you to part-buy, part-rent a property and gradually increase your stake until you own it outright.
You buy a share of between 25% and 75% of the property's value, and the housing association owns the remaining share. It then rents it out to you at around 3% of the share's value. For more information about shared ownership, visit direct.gov.uk.
FIVE: Save, save, save for your deposit
Start saving. Work out a monthly budget, decide cutbacks, and put a little away each month. It may seem boring, but if getting on the housing ladder is your big dream, it'll be worth it in the end.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.