London’s housing market can seem like an insurmountable challenge for first-time buyers, especially with the average deposit for a London home now hovering around a staggering £142,870. This figure is nearly a third of the typical purchase price, rendering the dream of owning a home a distant reality for many. However, before you resign to the fate of eternal renting, let’s explore some innovative schemes that could be your ticket to homeownership, even if your savings account is looking a bit lean.
Understanding the Deposit Dilemma
The first hurdle in the London property ladder is the hefty deposit. With living costs soaring, saving such a significant amount is often not feasible without substantial financial support or a stroke of luck. But this shouldn’t deter you from exploring your options.
Deposit Unlock: A Key to New Builds
The Deposit Unlock scheme could be your way forward if you’re eyeing a new-build property. With a modest 5% deposit requirement, this scheme partners with specific house builders and lenders, like Newcastle Building Society and Nationwide. It works around the banks’ usual hesitance to lend against new properties by having the builders insure the mortgage, thus protecting the lender from loss. The scheme’s reach is currently limited but has the potential to expand.
HomeNow: Rent Your Way to Ownership
For those already renting, HomeNow offers a creative solution. This scheme allows you to rent a property with the option to claim a third of the property’s equity increase after five years, which you can use as a deposit to purchase the home. It’s a win-win situation where you enjoy the freedom to make the space your own while building towards ownership.
Save to Buy: Pay Your Deposit While You Live
Fairview’s Save to Buy scheme is another innovative approach, offering first-time buyers the chance to live rent-free in a new property while their monthly payments go towards a deposit for eventual ownership. This setup is designed to help you gather enough funds for a deposit in as short as six months to a maximum of two years.
Skipton’s 100% Mortgage: A Full Loan with No Deposit
If saving for a deposit is out of reach, Skipton Building Society has an alternative: a 100% mortgage. Targeting tenants with a solid history of rental payments, this option can lend up to £600,000 for buying a home without any initial deposit. However, it’s crucial to consider the potential for negative equity and the less competitive interest rates due to the high loan-to-value ratio.
Even: Boost Your Deposit with an Equity Loan
Lastly, companies like Even offer a deposit-boosting equity loan. With a minimum of a 5% deposit, Even can provide an additional loan of up to £100,000. When you sell the property, you share any profit or loss with Even proportional to their contribution to your deposit.
The Property Market
These schemes are more than just financial products; they represent hope and opportunity. Consider these options carefully. Each scheme has its pros and cons, and what works for one might not be suitable for another. Always consult with a financial advisor to understand the full implications of these schemes and how they align with your personal circumstances.