Key points –
- Joint Borrower Sole Proprietor Mortgages: This is a type of guarantor mortgage that allows up to four incomes to be considered for a loan, enabling parents to help their children buy a home, with the property legally owned solely by the child.
- Skipton’s 100% Rent-to-Prove Mortgage: A unique mortgage option for first-time buyers that requires no deposit, allowing them to borrow the full property price based on their rental payment history. However, it comes with a higher mortgage rate and potential risks like negative equity.
- Shared Ownership Schemes: These have been around since the 1980s and involve buying a percentage of a new build property (often 25%) and paying rent on the remainder. Over time, buyers can increase their ownership share, although there are limitations such as not being able to rent out the property.
- Deposit Unlock Program: A scheme that allows first-time buyers and home movers to purchase a new build property with just a 5% deposit, with developers insuring the mortgage to make lenders more amenable to high loan-to-value mortgages.
- Deposit Booster Schemes and Pocket Living: Deposit Booster schemes help augment a deposit through an equity loan, offering access to better mortgage rates. Pocket Living, specifically for Londoners, offers affordable micro flats at 20% below market value, focusing on building local communities for first-time buyers.
In a period where the property market feels increasingly out of reach for many, especially first-time buyers, it’s crucial to explore all available avenues. The past year has been particularly challenging, with soaring mortgage rates and stringent lending criteria. However, despite these hurdles, there are still ways to achieve homeownership, albeit through unconventional methods.
Joint Borrower Sole Proprietor Mortgages: A Family Affair
One such method is the Joint Borrower Sole Proprietor (JBSP) mortgage, a type of guarantor mortgage. This allows up to four incomes to contribute to the loan, typically enabling parents to assist their children in securing a mortgage. The unique aspect of JBSP mortgages is that only the child will legally own the property, despite the shared financial contribution.
Danny Belton from Mortgage Advice Bureau highlights the critical role of JBSP in enhancing mortgage affordability for first-time buyers. But, as he cautions, all contributing individuals should be prepared to cover payments if necessary. Mark Harris of SPF Private Clients adds that split-term options in JBSP mortgages can mitigate the impact of an older guarantor’s age on loan affordability.
Skipton’s 100% Rent-to-Prove Mortgage: No Deposit, More Possibilities
Another innovative option is Skipton’s 100% mortgage, particularly attractive for long-term tenants. It allows first-time buyers to borrow the entire property price without any deposit. However, Harris notes its restrictions, including a relatively high mortgage rate and the potential risk of negative equity.
Shared Ownership: A Step at a Time
Shared ownership, a concept dating back to the 1980s, has gained popularity as an alternative homeownership route. It involves buying a portion of a new build property (often 25%) and paying rent on the remainder to a housing authority. The option to gradually increase one’s share in the property, known as “staircasing,” is available, though the scheme has its limitations, including the inability to rent out the property and potential difficulties in reselling.
Danny Belton acknowledges that while shared ownership can be more costly than traditional mortgages, it can lower the barriers to owning a home.
Deposit Unlock: A New Door Opens
Deposit Unlock, which is being heralded as a replacement for the discontinued Help to Buy loan scheme, allows the purchase of a new build with just a 5% deposit. The risk for lenders is offset by an insurance paid for by developers, making these high loan-to-value mortgages more accessible.
Deposit Booster Schemes: Giving Your Deposit a Lift
For those struggling to save a meaningful deposit, Deposit Booster schemes like those offered by Proportunity and Even can be a lifeline. They provide an equity loan to supplement your deposit, potentially securing a better mortgage rate. Harris, however, warns that these schemes are not widely favored by lenders and can be complex.
Pocket Living: Affordable Urban Living
Pocket Living offers an innovative solution for London-based first-time buyers, offering micro flats at 20% below market value. These compact one-bedroom flats are designed for efficiency and affordability. The scheme targets those typically priced out of their local area and focuses on building community spirit.
Final Thoughts
Despite the daunting headlines, these options provide a glimmer of hope for first-time buyers. Whether struggling with deposits or borrowing capacity, it’s worth exploring these schemes and products to find a fit for your circumstances. The journey to homeownership, while challenging, is not impossible with the right strategy and support.