For young people with no savings, low incomes and debts from student loans and credit cards, nothing makes the heart sink faster than the words property ladder. Understandably so. Aspiring homeowners face high house prices and high rents, but are often stuck on low incomes. Research by Halifax shows that it will take a first-time buyer five years to save the average deposit of £23,967 for a first home. The government claims to be stepping into the breach by increasing the number of homes built each year, from 150,000 to 200,000 by 2016, which it says will make housing more affordable. It also plans to improve availability of shared-equity schemes. The difficulty with shared-equity schemes, which allow first-time buyers to buy a portion of the property and pay rent on the rest, is a lack of information and restrictions on eligibility. It is always worth contacting your local housing association for further information. Current schemes, such as the key worker scheme, are available only to public sector employees, such as teachers or nurses. But from October a new shared-equity scheme will enable some low-earning first-time buyers employed by the private sector to take out a mortgage for 75 per cent of a property’s value, with the government and a mortgage lender sharing the cost of the remaining 25 per cent. If you are not eligible for a shared-equity scheme, there may still be help at hand. If your parents are unable to help financially, they may act as guarantors. This would mean that their income would be taken into account by the lender, so if there are defaults on the payments, your parents would be liable to pay. If your parents cannot act as guarantors, some lenders will offer up to 125 per cent of a property’s value. Mortgages of 100 per cent or more are available, but rates tend to be higher than on those where you put down a deposit. Another option is to share the mortgage with a partner, sibling or friends. Legal work that contains details of how you would split the equity when you sell the property is important to avoid conflict farther down the line. If your salary is low, but is likely to rise significantly in the future, a mortgage lender may also consider future potential earnings. Some larger lenders will calculate your loan on the basis of how much you can afford, but using a broker may further boost your chances of receiving a higher loan. Article date: July 2006

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