Stepping Onto the Property Ladder

It is not at all easy to get onto the property ladder, irrespective of the fall in house prices recently. First time buyers are frequently faced with mortgage offers demanding from 25% to 40% deposit, and this is very difficult for young people to raise.

Raising the Deposit

There are a few solutions to this, and although getting a loan for the deposit might seem attractive to desperate young couples, it should not be considered: at least not from a traditional lender, since it would have to be unsecured since you have no home to offer as security, and such loans attract a high rate of interest.

You could wait until you have saved enough for the deposit, but that is going to take along time. You don’t get much of a home for €100,000 these days, and even then it will take a long time to save from €25,000 to €40,000. So what other options are available?

Help from Parents

Your parents might be able to help. Up to 40% of first-time buyers get help from their parents, and if they can afford it then accept it gratefully.

The more the better, because they are unlikely to charge interest, and even if they do it will be lower than a commercial firm would charge.

You could also buy your property in partnership with your parents, with an agreement that you will buy their share back when you can afford it. That gives them security in case you sell up or anything else happens. They could also act as guarantors, paying your mortgage payments should you fail to do so. This could get you a mortgage with a lower deposit. This is not always a good idea, unless your parents are able to meet the payments should you fail - in such a case a joint purchase is the better of the two.

Joint Purchase with Friends

You may have seen TV programs where friends jointly purchase large properties, such as stately homes, and agree on who lives in what rooms.

This can be applied to ordinary homes, with two couples jointly purchasing the best property that they can afford jointly. This is gaining in popularity, but can be risky.

It depends on how well you know and can trust your friends. Many good friends fall out when they vacation together, so imagine if they had to live together! Not only that, but what if one half of the partnership wanted to sell up? What is one half were unable to meet the mortgage payments regularly? Do you pay for them or risk the house being forcibly sold?

Such agreements must be in writing with every eventuality covered in the agreement. You should each have your own solicitor to make sure that everything is legally covered should you fall out with each other. If you purchased your homes as "Tenants in Common" your share will pass into your estate on your death rater than going to the co-owner, were it purchased on a co-ownership basis.

Extend the Mortgage Period

Most first-time buyers arrange their mortgage over 25 years as a compromise between lower repayments and higher overall interest costs.

However, you can consider extending that to 30 years if circumstances justify it. Most mortgage lenders are taking affordability as being more important that your earnings, in terms of how much they are willing to lend. Into that comes your credit record and any other financial commitments you have.

A mortgage spread over 30 years will be more affordable than the same amount borrowed for 25 years. It might also enable you to purchase a better house in a better area, even if you are warded four times your joint salaries. A mortgage over this period isn’t really so unusual, because many, if not the vast majority, of people upgrade after a few years and take out another 25 year mortgage as their income rises.

Therefore, 30 years is no more than most people pay mortgages for in any cases, and many are paying all their lives as they progressively rise up the ladder with ever-increasing quality of homes financed by new mortgages. If you can get a mortgage over 30 years that you can’t get over 25 years, it’s a no-brainer. This is particularly true if you can also negotiate the right to increase your payments as you earn more, and so pay the capital off quicker.