Currently, one in five would-be first time buyers are unable to afford the deposit so for them shared appreciation mortgages may represent the flexibility necessary to get that foot on the ladder -- but they should discuss all the issues before signing on the dotted line.
(PRWEB) August 31, 2007
Nine in ten (90%) struggling first-time buyers would be prepared to sacrifice a portion of the future increase in the value of their home -- if it meant getting on the property ladder now, despite the fact this decision could cost thousands of pounds in lost equity, according to online advice website FirstRungNow.com.
The growth in 'shared appreciation' mortgages over the past 12 months, which offers beleaguered first time buyers the opportunity to take out a smaller loan to value mortgage with a fixed rate top up loan -- as another alternative to saving for a deposit, has offered hope to potential home buyers.
However, only 14% of those first time buyers think they would be able to pay back the top up loan prior to reselling to the house. This means that they would have to share any equity generated form the sale with their mortgage lender.
Helen Adams, Managing Director at FirstRungNow.com comments; "First time buyers must not be blinded by these kinds of mortgages -- they are not a free pot of gold. They do represent a viable alternative to the traditional mortgage but first time buyers should be under no illusion it will mean that when they come to sell the property they will have to forego a proportion of the equity to repay the top up loan.
"Currently, one in five would-be first time buyers are unable to afford the deposit so for them shared appreciation mortgages may represent the flexibility necessary to get that foot on the ladder -- but they should discuss all the issues before signing on the dotted line."
Furthermore, over eight in ten (85%) aspiring first time buyers would be prepared to take out a 95% loan to value mortgage in order to take that first step - even if the price to be paid is sharing any future growth in the equity of the property.
Helen Adams concludes: "First-time buyers are willing to be creative in order to get a foothold in the property market and the fact that lenders are reacting by providing flexible loan products should definitely be encouraged.
"It is important to consider, that sacrificing part of the equity in the home, or taking out a top-up loan, may cause affordability problems when attempting to move up the ladder - but for many first time buyers this is a price they're willing to pay."
For the best and most inventive mortgages available to first time buyers visit the 'First Time Buyer Best Mortgages Table' found at http://www.firstrungnow.com
For further information contact:
020 7294 3649
0048 22 845 8137
Notes to editors:
About the research
FirstRungNow online poll 'buy your first home now - pay later?' July 2007 (1579 respondents)
FirstRungNow.com is the UK's foremost on-line advice centre for first time buyers. Established in 2003 it explains all the property and finance options so that aspiring home-owners can make informed choices. The site also features several innovative services designed to help first time buyers.
What is a shared appreciation mortgage?
A shared appreciation mortgage is where the buyer of a property can take out a mortgage for between and 60% and 80% of the property price and take a low, fixed rate loan to 'top-up' the additional money required to buy a first home. If the home increases in value the owner of the property shares the amount of equity that is funded by the loan (rather than the mortgage) with the lender.
How can first-time buyers get onto the property ladder?
FirstRungNow.com has a mortgage table with a difference that highlights the best and most creative mortgages available on the market that aim to help people get a foothold on the property ladder.