How are people still getting onto the property ladder I hear you ask? Gone are the days when you could get a 95 or 100% mortgage, and incomes have been dropping during the recent financial turmoil - so how can you get into property as an investment with a low income?
An increasingly popular choice for low income and single people is to buy through shared ownership. The other party in the deal tends to be a housing association or company which will buy out half of the property, so you only need to get a mortgage on the other half.
These types of mortgages have greatly increased in popularity in recent years as it has become very difficult for first time buyers to get on the property ladder unless they have a large deposit available to them, so there are plenty of great deals available out there if you shop around.
You will only own the part that you take the mortgage on. In most cases the housing association will buy anything from 25-50% of the property, and you will buy the remaining share, so you won't own their 25 or 50% and you must remember this.
Most lenders are more lenient where shared ownership mortgages are concerned, because they do in fact have the security of the funding from the housing association or other party, so in some cases they will actually lend you the full amount of your share of the property depending on the value. They will however, also factor in the rental costs into their budgeting which may reduce the amount they will lend.
One popular method used within shared ownership schemes is called 'staircasing'. This is where you are able to buy further portions of the property from the housing association at a later date, increasing the share of your home that you own. Not all schemes offer this, but it is a good option to have if you can.
Some shared ownership mortgages will allow you to purchase more of the property at a later date, known as 'stepped' or 'staircase' shared ownership schemes, and this is a potentially valuable option as you can eventually own the entire property.
Perhaps the best place to start when considering a deal of this nature is to speak with a financial adviser or mortgage broker. These are the kinds of experts who know the shared mortgage market and know which lenders actually offer them and under what conditions. A broker or advisor may charge a fee but this is ultimately worth it in the long run if it connects you to the best deal for you.
Whilst shared ownership deals are great for many people, remember that there are disadvantages. For example, as you are not the sole owner of your home, you may need permission should you wish to alter your home in any way. Redecoration, a new bathroom or an extension may need the permission of the party that owns the other share.
There are not many other ways for people on low incomes or by themselves to get onto the property ladder, so make sure that you explore this option before settling for a shared mortgage with friends, or a guarantor mortgage as it means you can buy into a property without anyone else, other than the housing association, being involved which is often desirable for many first time buyers.
An increasingly popular choice for low income and single people is to buy through shared ownership. The other party in the deal tends to be a housing association or company which will buy out half of the property, so you only need to get a mortgage on the other half.
These types of mortgages have greatly increased in popularity in recent years as it has become very difficult for first time buyers to get on the property ladder unless they have a large deposit available to them, so there are plenty of great deals available out there if you shop around.
You will only own the part that you take the mortgage on. In most cases the housing association will buy anything from 25-50% of the property, and you will buy the remaining share, so you won't own their 25 or 50% and you must remember this.
Most lenders are more lenient where shared ownership mortgages are concerned, because they do in fact have the security of the funding from the housing association or other party, so in some cases they will actually lend you the full amount of your share of the property depending on the value. They will however, also factor in the rental costs into their budgeting which may reduce the amount they will lend.
One popular method used within shared ownership schemes is called 'staircasing'. This is where you are able to buy further portions of the property from the housing association at a later date, increasing the share of your home that you own. Not all schemes offer this, but it is a good option to have if you can.
Some shared ownership mortgages will allow you to purchase more of the property at a later date, known as 'stepped' or 'staircase' shared ownership schemes, and this is a potentially valuable option as you can eventually own the entire property.
Perhaps the best place to start when considering a deal of this nature is to speak with a financial adviser or mortgage broker. These are the kinds of experts who know the shared mortgage market and know which lenders actually offer them and under what conditions. A broker or advisor may charge a fee but this is ultimately worth it in the long run if it connects you to the best deal for you.
Whilst shared ownership deals are great for many people, remember that there are disadvantages. For example, as you are not the sole owner of your home, you may need permission should you wish to alter your home in any way. Redecoration, a new bathroom or an extension may need the permission of the party that owns the other share.
There are not many other ways for people on low incomes or by themselves to get onto the property ladder, so make sure that you explore this option before settling for a shared mortgage with friends, or a guarantor mortgage as it means you can buy into a property without anyone else, other than the housing association, being involved which is often desirable for many first time buyers.
About the Author:
Howard writes for Just Commercial Mortgages the UK's No1 site for the latest commercial mortgage rates and commercial property finance news.
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