Getting on the Property Ladder - By: Parmdeep Vadesha, Posted on: 2008-05-26

More and more first-time homebuyers are finding that climbing up the property ladder is becoming more and more like scaling a mountain. The sentiment is brought about by rising interest rates and skyrocketing house prices. These concerns are further compounded by the fact that lenders have stopped offering affordable mortgages. However, these do not imply that first-time homebuyers are doomed to struggle forever, as there are other ways for them to go up that ladder.

According to Nationwide, the price of the average first-time homebuyer's home in London is nearing £250,000, and the snowballing effects of five interest rate increases add £80 a month to the cost of a £100,000 mortgage. This is proof that the property ladder is indeed getting harder to reach. In theory, young buyers are better off compared to the older generation. They are hard-working, well-educated and are well-paid However, the significant lack of supply and high prices are now making them stay off the market.

Obviously, there are solutions to this dilemma, including more affordable housing, mortgage tax relief and the cancellation of stamp duty for first-time buyers. In spite of this, buyers have to wait a long time before they can start enjoying these perks, if they ever come to realization at all. Fortunately, there are other options that first-time buyers can resort to.

Those who are considering a purchase may want to look at other schemes towards making home ownership a possibility. The following are some of the ownership methods made available even for those who have low income.

Shared Ownership

This type of home ownership scheme allows a homebuyer to buy a share of a property while the rest is owned by a housing association. This means the consumers pay a mortgage on the share they own, and rent on the rest. They can purchase more shares at a later time if they want to. Eventually, they may have the capacity to afford to buy the entire property.

This alternative is typically appropriate for those with regular income, but cannot afford to buy their own homes outright. Compared to buying a house privately, this option is considered less risky and more affordable because there is no need for a big mortgage. Shared ownership plans are usually run by housing associations.

Homebuy

This plan was initiated to assist housing association and council tenants purchase property on the open market. The homebuy scheme typically entails lending 25% of the purchase price. A buyer uses a mortgage and/or savings to pay the 75% balance. While he will not be obliged to pay anything towards the loan until the property is sold, he has the option to do so. During the sale of the property, the housing association will take 25% of the sale price, or less, if part of the loan has already been repaid.

This option is NOT available to:

1. Those who have rent arrears.

2. Buyers who are on housing benefit or have received it during the past 12 months.

3. Tenants who have violated the terms of their tenancy contract in the past.

Homebuy is obtainable in some areas only, and the number of loans is limited. Those who want to avail of said scheme must contact their landlord or the Housing Corporation.

Starter homes initiative

This alternative was developed for teachers, the police, nurses and other health workers, and is available to first-time buyers only. The initiative assists those who want to purchase a home near the community where they work but can't afford the property prices due to their astronomical proportions.

Those who avail of this scheme may be entitled to:

* An interest-free loan

* A lump sum that doesn't have to be repaid until the property is sold

* A shared ownership contract

Starter home initiatives are not available in all places, and the number of loans is limited. Most of these plans are offered in London and the south east. Interested buyers may get in touch with their local council or the Housing Corporation.

With these home ownership schemes, first-time buyers have other options to get a foot on the property ladder. Until such time when affordability is not an issue anymore, these alternatives will serve as better opportunities for consumers to buy their own homes.

Copyright (c) 2008 Parmdeep Vadesha

Article Source: http://articlevally.com

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