Over at The Fair Investment Company blog they report that in spite of the credit crunch leading to those desperate to sell, dropping their prices quite dramatically, it's no easier for first time buyers to get on the housing ladder. They say ....
"First time buyers now have to come up with a mortgage deposit of 13 per cent of the property value which equates to £21,055 – more than the average salary. The average house price for first time buyers is £162,000, with mortgage lenders typically asking for 13 per cent as a deposit; the average age of a person taking their first step onto the property ladder is 28, and the average salary for a 28 year old is £20,113 a year.
From today, Halifax – the UK's biggest mortgage lender – will refuse home loans to people who need to borrow more than 60 per cent of the property's value, so, unless first time buyers have generous parents, it is unlikely the property ladder will even be in sight for them, and getting a foot on it will seem like an impossibility.
Even though interest rates have fallen three times since last December and have not been raised since July 2007, lenders are still making it difficult to get a mortgage, especially a first time buyer mortgage, and are offering their best rates to buyers who have at least a 25 per cent deposit.
While the number of mortgages taken out in April was up four per cent compared to the previous month, it was down 36 per cent on the figures from April 2007. Many would-be first time buyers are opting to rent instead of buy because they cannot afford the deposit since the 100 per cent mortgage became a rarity earlier this year, and mortgage rates continue to rise. READ MORE HERE >>>
The good news is that there is an answer and it's called "Rent to Own" and yes, it's here in the UK.
Pioneer David Lee learned how to offer properties to working families from Rick Otton, who himself had learned the technique in the USA then brought it to Australia. David studied with Rick and now David is not only helping people to buy using this technique in Maidstone, Kent, he's busy teaching a network of people around the UK how to buy, and then sell on, on a "Rent To Own" basis, also known as Rent2Own.
There are now flourishing "Rent To Own" hotspots around the UK, including Worthing, Shoreham & Littlehampton in West Sussex, Brighton, East Sussex, Streatham in London, Enfield and Haringey, Eastbourne, Hailsham & Hastings, Belsize Park, London, Birmingham, in Hertfordshire - Hoddesdon and Broxbourne, Oxford, High Wycombe and Reading, Tipperary and Dublin, in Ireland.
Essentially you are buying the right to buy the property at some time in the future, typically two years time, for todays prices. This is even more advantageous in this market as you are probably securing the right to buy in two years time, at last year's prices.
With the Rent To Own seller typically asking for a 3-5% deposit (or Option Fee), a proportion of your rental payment is allocated to your eventual purchase, as is your deposit. This can be as high as 100% of the rent although more usually it's 10% - 30%.
Then, if the property needs renovation, or even just some TLC, you have the opportunity to increase the value, making it even easier to get a mortgage a year or two down the line.
Buying like this is not only great for first time buyers, but for the self-employed, those with impaired (but improving) credit ratings, or those newly arrived in the country.
How do you find such deals? Simply look in your local paper, usually in the "Property To Let" section. The ad will say something like "Don't Rent....Buy" and mention that no mortgage is required.
Happy house hunting!
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