Can't afford to rent? Here's how you can buy

Struggling to pay the rent? Can't afford to buy? Think again. Simon Read, Personal Finance Editor, explains the tricks of getting your foot on the ladder

Borrow from parents

Not all parents are able to hand over the tens of thousands of pounds it can take to get you on the property ladder, but they can help by acting as guarantor. It's not a decision to take lightly; guarantors are liable for the whole loan if anything goes wrong, so legal advice is important.

An alternative is for parents to use some of the equity from their own home as part of deposit. Some lenders accept savings: a parent would need to put around 20 per cent of the value of the loan into a savings account.

Bath building society and National Counties, for instance, will both lend up to 95 per cent of the value of a property under parent-related deals.

Buy with friends

Lenders are open to the idea of joint mortgages although each of you will need to raise your own deposit and show that you can afford to repay the loan. Some lenders will take into account only two incomes when deciding how much to lend.

It can seem like an ideal solution but potential homebuyers need to look closely at the practicalities.

While flatsharing can be fun, when you own the property other factors come into play, not least the responsibility for maintaining it. You must be sure that anyone you buy with is responsible enough to pay the mortgage as well as pulling their weight when it comes to chores and odd jobs.

You also need to think about what will happen when someone wants to move out and sell. It's essential to draw up a contract covering all eventualities.



Shared ownership

Under shared-ownership schemes – which are run by housing associations – you buy a share of a home and pay rent on the rest, which is still owned by the housing association.

You can buy from just a quarter of a property to up to 75 per cent and rent the balance until you can afford to buy the rest, in stages if necessary.

The government-backed shared ownership scheme is called HomeBuy and is open to households earning less than £60,000 a year who would otherwise not be able to afford a home in their area.

It's available to first-time buyers or those who rent from the council or a housing association as well as key workers, although qualification can vary across the country. You could also qualify even if you once owned a home, as long as you can't afford to buy one now.

With property prices down in many areas, the scheme could actually work to your advantage because you will not only get a leg up on to the property ladder, but also when you buy new shares in your home you'll pay the going market rate. If prices have fallen in your area, the cost of the rest of the home will be cheaper.

Under the HomeBuy scheme you can also arrange a loan of up to 30 per cent of the value of a property which will allow you to get a lower rate mortgage.

The loan has no fees for five years but when you sell the property the housing association must be repaid the same percentage of the sale value.

So if you borrow £30,000 towards a £100,000 property and sell it at £200,000, you'd have to repay £60,000.

Rent to buy

Renting can be a step to buying through the Rent to HomeBuy schemes offered through housing associations.

Under the schemes you can rent a new home from a housing association for up to five years and pay just 80 per cent of the open-market rent. But you must commit to saving the rest of the rental value towards buying a shared-ownership property.

Once you have saved the money you would enter a HomeBuy scheme and be able to buy from 25 per cent of a property. So if you rented a £100,000 home you wanted to buy, you'd need to save at least £25,000 over five years.



Right to buy

If you're a council house tenant in England and Wales – the scheme has been abolished in Scotland – you may be entitled to buy the home you rent. You will get a discount based on how long you have been a tenant (at least five years), where you live, and whether it's a flat or a house.

The discount varies across the country but is as much as £38,000 in some areas in the southeast of England, falling to £16,000 in London and Wales.

You'll then need a normal mortgage, which should be reasonably easy bearing in mind the discount – and the instant equity you will have.

If you choose to sell the property within five years, you'll have to repay some or all of the discount, depending on how much time has passed.



Housebuilders' deals

Builders are keen to sell their properties and many have teamed up with lenders to set up deals aimed at attracting first-time buyers.

Lenders such as Melton Mowbray and Saffron building societies and the Woolwich – owned by Barclays – have linked with the likes of Taylor Wimpey and Bovis to offer 95 per cent loans.

Barratt has a deal though which it will lend parents up to £50,000 to cover a child's deposit.



Buy a property at auction

There are huge bargains to be found at auction, but you need to be level-headed. Find out how much work is needed on a property to make it habitable. What kind of work is needed and how much can you tackle? How much will you have to pay contractors to carry out essential repairs?

There's also the emotional aspect of buying a property at auction. Many are repossessed properties that have been snatched back from homeowners who couldn't afford their mortgages. How would you feel about benefiting from someone else's misfortune?

Young suffering more than elderly

Young people's spending power has been squeezed substantially more than that of the elderly in recent years, according to research from the Institute for Fiscal Studies.

The think-tank found that the average rise in annual expenditure in 2008 and 2009 for households in which the oldest person was under 35 was seven percentage points below pre-recession levels. But in households in which the oldest person was over 65 there was no significant fall.

The research also shows that the impact of the downturn on average household spending has been greater than in previous recessions. Spending was down around 5 per cent, adjusted for inflation, between early 2008 and mid 2009. In the recessions of the early 1980s and early 1990s, household spending fell by just 3 per cent.

Ben Chu

Case studies: On (and off) the ladder

Amy Samson, 33

Artist and songwriter

"The best I could hope for in London is a one-bed flat which I could possibly share with my boyfriend but even that would be a stretch and I don't really want to depend on someone else.

"When the opportunity came up to buy my brother-in-law's flat back home in Dundee for £72,000, I thought I should do that and rent it out. But the lenders were demanding a 25 per cent deposit on a buy-to-let mortgage, which I just can't afford. Some told me to just claim I was using it as a holiday home but I don't want to be dishonest.

"I don't think I will ever escape. I cannot save up the money to put down on a house while I'm paying out around 40 per cent of net monthly income on a mortgage."

Richard Greenwood, 30

Charity worker

"I would never have been able to afford the 90 per cent mortgage I took out if I did not do a full year living rent-free and that is just not an option for most people. My wife, Kasia, and I were very lucky to be able to live with relatives and my parents also gave us a little money. I was paying around 40 per cent of my monthly net earnings [on rent] before moving to London.

"We are not saving money each month by paying a mortgage instead of rent, but owning our home gives us a lot more security. I have a lot of envious friends who are worried they will never be in a position to own their own home."

Kevin Rawlinson

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

    They fled war in Syria...

    ...only to get stuck and sidetracked in Hungary
    From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

    Title sequences: From The Prisoner to Mad Men

    Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
    Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

    Giorgio Armani Beauty's foundations

    Sumptuous fabrics meet luscious cosmetics for this elegant look
    From stowaways to Operation Stack: Life in a transcontinental lorry cab

    Life from the inside of a trucker's cab

    From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
    Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

    Kelis interview

    The singer and sauce-maker on cooking for Pharrell
    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea