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A First Time Buyer's Guide to Getting on the Property Ladder

13/09/2013 14:12 BST | Updated 12/11/2013 10:12 GMT

Everyone always says that renting a property is like money down the drain, but what if you just haven't got the cash to buy? Don't worry, because here you'll find a guide to the options available to you - so that you can afford to make that move.

Over the past year, property prices have already increased 20% in some areas. According to Halifax the average house price in the UK is now over £170,000 - the highest amount in five years. Look behind the averages and the picture is even scarier for many first time buyers, with many simply priced out of city areas. What's more, many parents are starting to worry 'How will my children ever afford to live around here?'.

With a little bit of know-how, it's still possible to get a foot on the property ladder - and shared ownership with a friend or friends is one way of making that first step. If you can afford to buy a whole house, there are plenty of ways to save money and make the buying experience a bit less painful, whether you snap up a bargain at auction or get a cheap deal from developers.

A Helping Hand

In 2012, the Government announced plans to introduce interest-free equity loans in the form of the Government Help to Buy scheme. This is where the Government provides up to a 20% equity loan, with the buyer putting down the remaining 5%. The Government will gain from appreciation as they own 20% of your home once the property is sold and as a buyer, you'll still own 80% of the property - a great deal that many people are taking up. Help to Buy is currently available until to the end of 2014 so many people are trying to get on the ladder via this method during this time period.

Shared Ownership

This is where you can buy a share in a house and pay rent to a housing association on the part that you don't own. After a set period, you can buy the landlord's share or even sell your share on. Usually it costs the price of your mortgage payments plus rent., but you may also have to pay a reservation fee to the housing association. With this method, buyers can buy into a home that they could never afford outright. Rents are set to inflation, rather than interest rates, so you are protected from fluctuating mortgage payments. There are shared ownership waiting lists that you can join, with priority given to council or housing association tenants. S Direct House Buyer have recently commentated on how to identify hotspot areas.

Buying with Friends

It's useful to know that up to four people can be named on a single mortgage agreement - the typical mortgage limit will be 3.25 times the salary of the highest earner, or 2.5 times the two highest salaries.You need to draw up a Document of Trust or co-habitation agreement through your solicitor, setting out the details of each partner's share of the property and giving each of you first refusal on the other's stake in the event that one decides to sell up their share. According to Direct House Buyer,"considerations such as good transport links and locality of work are important considerations that need to be agreed upon with all parties".

What it costs: Your share of the deposit and mortgage plus the cost of drawing up the co-habitation agreement (around £150).

Pros: It is another cheap way to get your foot in the door and the arrangement will enable you to split any development and maintenance costs, as well as bills.

Cons: You need to get on very well. If one wants to sell out but the other can't or won't buy the remaining share, a lengthy stalemate could ensue. Also, each partner in the purchase is liable for the full mortgage payments in the event that the other drops out. For this to work you need suitable friends, a suitable house and a lender.

So there you have it, proof that it can be done.