I’m a First Time Buyer but I cannot save enough deposit.
This is a common problem that first time buyers have. With current rental figures often taking at least a third of your monthly disposable income, and rising costs of living, the opportunity to save anything more than a few hundred pounds a month is becoming smaller and smaller. Add in to this the removal of the government’s help to buy scheme, and the options for first time buyers with a low deposit are reduced still further.
The government’s shared ownership scheme, which is run by housing associations, is one option, as you usually only require a minimum of 5% deposit for the share of the property you are buying. However, you do still need to pay rent on the part of the property that is owned by the housing association, so you will end up paying two payments per month to own the property. In theory this should still add up to less than you would have to pay if you were purely renting, but the difference between the two is becoming smaller with time.
This means that often first-time buyers are having to look to help from their family to be able to afford their first property. More than half of first-time buyers have some form of parental help, which is usually in the form of a gifted deposit. This is where the parents have disposable cash that they can gift to their children as a deposit to help them onto the property ladder.
For the same reasons as it’s hard to save a deposit, even parents who are homeowners are being squeezed in terms of disposable cash. Often their wealth is tied up in the value of their property, in the form of the equity that they have in bricks and mortar.
Ideally therefore, there would be a way to release some of that equity to help children with their deposits. Most people would instantly think Equity Release fits the bill, and in theory it does. But this is not the only option. It is possible to also release equity via a Retirement Interest Only mortgage or through remortgaging onto a standard mortgage with a higher loan amount.
There are always pros and cons for each of these options. If the wish is to retain wealth in the long term, usually a Retirement Interest Only mortgage or a standard mortgage with higher borrowing are better options than Equity Release.
At Amram we have experience of offering Shared Ownership, Retirement Interest Only and Standard mortgages. Our advisors are adept at explaining all the details to consider, along with their pros and cons. We pride ourselves on offering the best advice for the individual, looking at their circumstances in detail. We do not offer Equity Release type mortgages ourselves, but if we think that this is your best option, we do partner with brokers who can organize this for you. If you would like more information, or wish to talk to an advisor, then please contact us on any of the methods below.