It’s an odd state of affairs when the home you live in (or would live in, if you could afford to buy it) ‘earns’ more than you do. But a recent study from the Department for Communities and Local Government found exactly that. In 2015, the average home in the south of England increased in value by £29,000, while the average pay in the region was £24,542.
Based on this (and other scary stats) it often looks like home ownership for millennials is an impossible dream - unless you’re gifted a massive chunk of cash, or come into some inheritance, that is. But there are some alternative ways to think about owning your first place. And thinking about fresh, less traditional routes may be what ends up working for you.
First things first: where do you begin? As is the case with most stuff, start small. “Things like improving your credit score at least 12 months before applying for a mortgage,” Alison Davies, principle financial advisor at John Davies Investments and Mortgage Services, tells HuffPost UK. “A good credit score will make it much easier for you to get a mortgage, without which you can’t buy a house. We suggest doing the following:
Make sure you are on the electoral role at your current address and all bank accounts, credit cards, loans, phone contracts and driving license are also registered at that address (not a previous one).
Pay credit cards and loans by direct debit to ensure that you do not miss any payments.
If you don’t have any credit cards or phone contract, apply for a credit card with a modest limit. Then use it - but clear the balance at the end of each month to build up some positive credit.
Obtain credit reports for you and the person you intend to buy with (if you’re not buying alone) to ensure no surprises or difficult conversations at the final hurdle.”
Once you’ve future-proofed your credit score, keep things on an even keel. “Lenders like stability,” says Justin Basini, CEO of credit rating company ClearScore. “It shows that you’re reliable and in a good place to pay back money each month. When you’re looking at applying for a mortgage it’s worth holding off on any big changes in your life such as moving jobs or going freelance. To lenders this can look risky, as you might still be in a probationary period in a new role, or not receiving a regular income if you’re going freelance.”
Then, start saving for a deposit, says property expert Mark Homer of property education organisation Progressive Property. “Some mortgage lenders require as little as 5-10%, but obviously this can be really hard when you’re new to the job market and paying a fortune in rent. Shop around for the best savings account and commit to as much as you can afford each month. It will add up and you’ll become more motivated to save as your pot of money grows.”
One different route to try, if getting a deposit together is proving hard, is to explore a Post Office Family Link™ mortgage, provided by Bank of Ireland UK. If you’re struggling to get the cash you need together, you could raise the funds you need by borrowing the money against a family member’s (assistor’s) home, as long as that property is mortgage-free, and raise a mortgage for the rest. The deposit is interest-free, and paid back over five years, while the mortgage repayments (subject to interest) are made over a term that suits you - up to 35 years. Oh - and your assistor is advised to seek legal advice, about the move. Worth a look? We certainly think so.
Another different tack is Government schemes, such as Help To Buy. As long as you’re looking to purchase a new-build property, you’re required to save just 5% of the property value as a deposit, and the Government will loan you a further 20%. This means you have a total deposit of 25%, which will make you much more attractive to mortgage lenders.
Have you had any luck with these alternative ways to home ownership? Let us know if so, in the comments below.